Non Tariff Measures in ASEANvii Acknowledgements While tariffs have been reduced, the number of...

Non-Tariff Measures in ASEAN

edited by

Lili Yan Ing

Santiago Fernández de Córdoba

Olivier Cadot

© Economic Research Institute for ASEAN and East Asia and United Nations Conference

on Trade and Development, 2016

Published April in 2016 Second Printing in February 2017 The findings, interpretations, and conclusions expressed herein do not necessarily reflect the views and policies of the Economic Research Institute for ASEAN and East Asia and United Nations Conference on Trade and Development, its Governing Board, Academic Advisory Council, or the Institutions and governments they represent. All rights reserved. Material in this publication may be freely quoted or reprinted with proper acknowledgement.

National Library of Indonesia Cataloguing in Publication Data ERIA Research Project FY2015 No.01 ISBN: 978-602-8660-89-1

Cover Art by Artmosphere Cover Design by Lili Yan Ing, Chrestella Budyanto and Fadriani Trianingsih

iii

Foreword [ERIA]

Over the years, multilateral trade negotiations have helped to substantially reduce

tariff rates. While tariffs have been reduced, the number of non-tariff measures (NTMs) is

increasing and is often blamed to be a source of the lack of integration in ASEAN. Yet, in

spite of their growing number, we generally have little understanding and information, and

thus there is an urgent need to develop a better understanding and transparency of

existing NTMs.

The Economic Research Institute for ASEAN and East Asia (ERIA), in collaboration

with the United Nations Conference for Trade and Development (UNCTAD), and ASEAN

national teams consisting of economists and government officials of ASEAN countries

collected and classified NTMs in the 10 ASEAN countries (Brunei Darussalam, Cambodia,

Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Viet

Nam) based on the latest Multi Agency Support Team February 2012 classification. They

worked on all regulations and official documents, including international conventions

adopted by countries which had been in effect by January 2015.

The project is led by Lili Yan Ing (ERIA) and Santiago Fernández de Córdoba

(UNCTAD). The report editing team consists of Rizqy Anandhika and Ruth Elisabeth. The

core team consists of Michelle Ayu Chinta Kristy, Chi Le Ngo, Maxim Gubarev, Fabien

Dumesnil, and Denise Penello-Rial. The project is advanced through the supervision and

comments from Shujiro Urata (ERIA), Olivier Cadot (Lausanne University), Ralf Peters

(UNCTAD), Ponciano Intal, Jr. (ERIA), and Guillermo Valles Galmes (UNCTAD). The successful

work would not have been possible without the invaluable work of national teams

composed of the economists and government officials of ASEAN countries.

The project consists of two phases: NTM data collection (the data were released in

January 2016) and country report (April 2016) and data analyses on how NTMs will affect

trade in the region (January 2017). The project aims to (i) collect, validate, and store NTM

data from official sources; (ii) improve the general understanding of these measures and

their impact on world trade; and (iii) provide insights on NTMs in ASEAN countries.

The project also significantly benefited from the supervision and support of ASEAN

government officials, particularly Rebecca Sta Fatimah (MITI Malaysia), Sulaimah

iv

Mahmood (MTI Singapore), Donna Gultom (MOT Indonesia), Phuong Van Hoang (MIT

Vietnam), and Mark Ng (MTI Singapore). Along the way of conducting the project, the

initial work and preliminary findings were well endorsed and accepted at the ASEAN’s

Senior Economic Officials Meeting in August 2015 in Kuala Lumpur, at the ASEAN’s High

Level Task Force in January 2016 in Vientiane and East Asian Senior Economic Officials

Meeting in April 2016 in Kuala Lumpur.

This initiative is only the beginning of the journey of ASEAN to improve the

transparency of NTMs. ERIA and UNCTAD will work hand in hand with ASEAN member

states in improving NTM transparency and overall trade environment.

Professor Hidetoshi Nishimura

President of ERIA

Jakarta, April 2016

v

Foreword [UNCTAD]

The ability to gain market access opportunities and to benefit from them,

increasingly depends on compliance with non-tariff measures (NTMs), such as sanitary and

phytosanitary measures and technical regulations. Although many NTMs have primarily

non-trade objectives, such as the protection of public health or the environment, they may

affect trade and represent a major challenge for exporters, importers and policymakers. It

is therefore important to understand the use of NTMs and their implications for the

formulation and implementation of effective development strategies.

Comprehensive, systematic and reliable information about NTMs is unfortunately

scarce to obtain. The collection of NTM data is a highly resource-intensive task and

requires specific, technical knowledge. In this context, the International Classification of

NTMs was developed by several international organizations, the Multi-Agency Support

Team*, in 2006. The collection, classification and analysis of NTMs as well as the

coordination of the global effort to enhance the transparency of NTMs have been a regular

activity of UNCTAD. We are aiming to collect data on NTMs covering at least 90 per cent of

world trade by the end of 2016.

ASEAN member countries have resolved to work on the elimination of non-tariff

barriers. The need to create a standardized, high quality, and comprehensive NTMs

dataset of the region called for close cooperation between the Economic Research Institute

for ASEAN and East Asia (ERIA) and UNCTAD.

Since December 2014, ERIA and UNCTAD have collaborated to create a

comprehensive NTMs database of all ASEAN countries. The database presents official

regulations that are currently imposed affecting imported and exported products.

Regulations are classified according to types of measures, affected products at the tariff

line level and partner countries. This enables easy and well-structured access to the

information. It also allows for case-specific and more systemized analysis and research as

well as effective support to policymakers for their efforts in regional and global economic

integration.

* MAST Group is composed of: Food and Agriculture Organization of the United Nations, International Monetary Fund, International Trade Centre, Organization for Economic Cooperation and Development, United Nations Conference on Trade and Development, United Nations Industrial Development Organization, World Bank and World Trade Organization.

vii

Acknowledgements

While tariffs have been reduced, the number of non-tariff measures (NTMs) is

increasing and is often blamed to be a source of the lack of integration in ASEAN. For NTMs,

disciplines on transparency are the key, and regional and multilateral NTM mutual

recognition and harmonisation are the answers. Turning back to 2013, when we started

the project to develop an NTM database for all 10 ASEAN countries within one year was a

kind of ‘mission impossible’. With dedication of national teams and government officials,

we have successfully developed the NTM database; above all, we have likewise developed

NTM expertise in this region.

The project is led by Lili Yan Ing (ERIA) and Santiago Fernández de Córdoba

(UNCTAD). The Report editing team consist of Rizqy Anandika and Ruth Elisabeth. The core

team consists of Michelle Ayu Chinta Kristy, Rizqy Anandhika, Chi Le Ngo, Maxim Gubarev,

Fabien Dumesnil, and Denise Penello-Rial. The project is advanced by supervision and

comments from Shujiro Urata (ERIA), Olivier Cadot (Lausanne University), Ponciano Intal, Jr.

(ERIA), Ralf Peters (UNCTAD), and Guillermo Valles Galmes (UNCTAD).

This mission would have definitely been impossible without hard work and

dedication of ASEAN national teams and collaboration of government officials: Brunei

Darussalam (Christina Ruth Elisabeth, Mohammad Yusri Yahya, Noramali dato Jumat);

Cambodia (Chap Sotharith, Christina Ruth Elisabeth, Anika Widiana, Neth Nero, Uy

Rthiymony); Indonesia (Ernawati Munadi, Indah Rahayu, Samroni Salim, Titis Kusuma

Lestari, Ayu Shinta Saputri); Lao PDR (Ampahphone Sayasenh, Saygnasak Sengaloun,

Phonesavanth Sittideth, Sonemala Naouanthasing, Vangchai Vang); Malaysia (Evelyn

Shymala Devadason, VGR Chandran, Tang Tuck Cheong, Ezral Uzaimi); Myanmar (Zin Naing,

Cho Thein, Win Min Phyoe); Philippines (Loreli C. de Dios, Paul Feliciano); Singapore (Hank

Lim, Anika Widiana, Bernard Aw, and government officials); Thailand (Chedtha Intaravitak,

Nuttawut Lasanapanyakul, Urairat Jantaraisiri, Maichanok Krapookthong, Wittawat

Prayookwong, Challee Khanksiri); and Viet Nam (Vo Tri Thanh, Anh Doung Nguyen, Than

Binh Minh, Phuong Van Hoang).

The project also significantly benefited from the supervision and support of ASEAN

government officials, particularly Rebecca Sta Fatimah (MITI Malaysia), Sulaimah

viii

Mahmood (MTI Singapore), Donna Gultom (MOT Indonesia), Phuong Van Hoang (MIT

Vietnam), and Mark Ng (MTI Singapore). Along the way of conducting the project, Regional

Leaders well endorsed and accepted the initial work and preliminary findings at the

ASEAN’s Senior Economic Officials Meeting (SEOM) in August 2015 in Kuala Lumpur,

ASEAN’s High Level Task Force in January 2016 in Vientianne, and lately at the East Asian

SEOM in Kuala Lumpur in April 2016.

We would also like to thank the editorial team— Fadriani Trianingsih, Abigail Ho,

Maria Priscila del Rosario, and Ainslie Smith—for putting these country reports nicely, and

Elisa Ayu, who provided valuable administration support for this project.

We would also like to extend our gratitude to all ASEAN Member States and

government officials, ASEAN Business Advisory Council (ABAC) and ERIA Research Network,

who significantly contributed to the success of this project and worked together with us to

support governments and the business community to have more transparent NTMs, to

have a better understanding of NTMs, to design better NTMs, to implement NTMs better,

and to move forward for better trade and investment policy and regulations.

ix

List of Project Members

Project Coordinators

Lili Yan Ing (Project Leader): Economic Research Institute for ASEAN and East Asia, Jakarta, Indonesia.

Santiago Fernández de Córdoba (Project Leader): United Nations Conference on Trade and Development (UNCTAD).

Shujiro Urata (Project Advisor): Waseda University and Economic Research Institute for ASEAN and East Asia (ERIA).

Ralf Peters (Project Advisor): United Nations Conference on Trade and Development (UNCTAD), Geneva, Switzerland.

Project Members

Oliver Cadot : Professor, University of Laussane, CEPR and FERDI. Muhammad Rizqy Anandhika: Economic Research Institute for ASEAN and East Asia, Jakarta,

Indonesia.

Chi Le Ngo: United Nations Conference on Trade and Development (UNCTAD), Geneva, Switzerland.

Denise Penello-Rial: United Nations Conference on Trade and Development (UNCTAD), Geneva, Switzerland.

Fabien Dumesnil: United Nations Conference on Trade and Development (UNCTAD), Geneva, Switzerland.

Maxim Gubarev: United Nations Conference on Trade and Development (UNCTAD), Geneva, Switzerland.

Michelle Kristy Ayu: United Nations Conference on Trade and Development (UNCTAD), Geneva, Switzerland.

Brunei Darussalam Christina Ruth Elisabeth: Center for Inclusive and Sustainable

Development (CISDEV) Prasetya Mulya School of Business and Economics, Indonesia.

Cambodia Chap Sotharith: Cambodian Institute for Cooperation and Peace (CICP), Cambodia.

Christina Ruth Elisabeth: Center for Inclusive and Sustainable Development (CISDEV) Prasetya Mulya School of Business and Economics, Indonesia

Anika Widiana: Center for Inclusive and Sustainable Development (CISDEV) Prasetya Mulya School of Business and Economics, Indonesia

x

Indonesia Ernawati Munadi: Wijaya Kusuma University, Surabaya, Indonesia

Lao PDR Amphaphone Sayasenh: National Economic Research Institute, Lao PDR.

Malaysia Evelyn S. Devadason: Faculty of Economics and Administration, University of Malaya, Malaysia.

VGR Chandran: Faculty of Economics and Administration, University of Malaya, Malaysia.

Tang Tuck Cheong: Faculty of Economics and Administration, University of Malaya, Malaysia.

Myanmar Cho Cho Thein: Yangon University of Economics, Myanmar.

Zin Zin Naing: Yangon University of Economics, Myanmar.

Philippines Loreli C. de Dios: Center for the Advancement of Trade Integration and Facilitation, Philippines.

Paul Feliciano: Center for the Advancement of Trade Integration and Facilitation, Philippines.

Singapore Hank Lim: Singapore Institute of International Affairs, Singapore.

Anika Widiana: Center for Inclusive and Sustainable Development (CISDEV) Prasetya Mulya School of Business and Economics, Indonesia

Bernard Aw: Singapore Institute of International Affairs, Singapore.

Thailand Chedtha Intaravitak: Thailand Development Research Institute, Thailand.

Viet Nam Vo Tri Thanh: Central Institute for Economic Management, Viet Nam.

Nguyen Anh Duong: Central Institute for Economic Management, Viet Nam.

Tran Binh Minh: Central Institute for Economic Management, Viet Nam.

xi

Contents

Executive Summary xii

Chapter 1 Collecting and Classifying Non-Tariff Measures in ASEAN 1 Santiago Fernández de Córdoba, Maxim Gubarev, Michelle

Kristy and Chi Le Ngo

Chapter 2 Non-Tariff Measures in ASEAN: A Simple Proposal 13 Lili Yan Ing, Oliver Cadot, Muhammad Rizqy Anandhika and

Shujiro Urata

Country Report

Chapter 3 Classification of Non-tariff Measures in Brunei Darussalam 37 Christina Ruth Elisabeth

Chapter 4 Classification of Non-Tariff Measures in Cambodia 51 Chap Sotharith, C. Ruth Elisabeth L. Tobing, Anika Widiana

Chapter 5 Indonesia’s Non-tariff Measures: An Overview 65 Ernawati Munadi

Chapter 6 Non-tariff Measures in Lao PDR 77 Amphaphone Sayasenh

Chapter 7 Non-tariff Measures in Malaysia 87 Evelyn S. Devadason, VGR Chandran and Tang Tuck Cheong

Chapter 8 Report on Non-Tariff Measures in Myanmar 103 Cho Cho Thein and Zin Zin Naing

Chapter 9 An Inventory of Non-Tariff Measures in the Philippines 113 Loreli C. de Dios

Chapter 10 Non-tariff Measures in Singapore 127 Hank Lim, Anika Widiana, and Bernard Aw

Chapter 11 Non-tariff Measures in Thailand 141 Chedtha Intaravitak

Chapter 12 Non-tariff Measures in Viet Nam 155 Vo Tri Thanh, Nguyen Anh Duong and Tran Binh Minh

xii

Executive Summary

Tariffs on regional trade are generally low as they have been progressively

liberalised first under the auspices of the General Agreement on Tariffs and

Trade/World Trade Organization (GATT/WTO) and, subsequently, in the context of

regional and bilateral preferential trade agreements. ASEAN member countries have

made significant progress in the lowering of intra-regional tariffs. The fact that tariff

liberalisation alone has generally been proven insufficient in providing genuine regional

economic integration for many developing countries has drawn further attention to

non-tariff measures (NTMs), of which the WTO disciplines are comparatively weak. The

use of NTMs, especially complex technical, sanitary and phytosanitary measures, has

increased significantly.

As the average tariff rates of ASEAN countries decreased from 8.9 percent in

2000 to 4.5 percent in 2015, the number of NTMs had increased from 1,634 measures

to 5,975 measures over the same period. The increase of NTMs was notable not only in

ASEAN but also around the world, particularly, between 2008 and 2011. The total

number of NTMs in the 10 ASEAN countries was 5,975 measures in 2015 of which 33.2

percent of total measures were in the form of SPS, 43.1 percent were TBT, 12.8 percent

were export measures, and the rest of 10.9 percent were in the form of various

measures.

A country with a relatively higher number of measures does not mean it is

relatively more protectionist than others. Even if a country has a relatively higher

number of percentage of affected products to total products, it does not necessarily

mean it will have relatively lower trade than the others.

Does this mean that all NTMs are benign? Not really. Many regulations are

poorly designed, failing to protect the public while unnecessarily complicating business.

For instance, many countries have complicated rules for pharmaceutical imports that

nevertheless fail to prevent widespread traffic of counterfeits. There are several reasons

for this. First, the governments know little about incentives and even less about how to

design market-based regulations, confusing effective with cumbersome. Second,

xiii

regulations are often enforced in punitive ways, reflecting the anti-business culture of

many administrations. Third, NTMs typically span the competencies of several ministries,

with no coordination mechanisms to make the necessary trade-offs.

A simple proposal in place is NTM streamlining to the national level by

implementing ‘dynamic disciplines’ that review trade and investment policy and

regulations regularly. This could be started by establishing a National Economic Council

(NEC) consisting of divisions on Trade Facilitation, Non-Tariff Measures, National Single

Window, Investment and Trade Agreement/Economic Cooperation. National and

regional disciplines on transparency are the key, and NTM mutual recognition and

harmonisation are the answers.

1

CHAPTER 1

Collecting and Classifying Non-tariff Measures in ASEAN

Santiago Fernández de Córdoba, Maxim Gubarev, Michelle Ayu Chinta Kristy, and Chi Le Ngo

United Nations Conference on Trade and Development

1.1. Background

Many developing countries have greatly benefited from the integration in the global

economy through international trade in goods and services. In the past, developing countries’

integration in international markets was made possible by appropriate policies such as tariff

liberalization, as well as initiatives related to trade facilitation and aid for trade. Today, deeper

integration in the global economy depends not only on liberal tariffs and supportive policies

but increasingly requires policy responses to various forms of complex trade-related regional

economic integration. The rising specialization and fragmentation of production led

increasingly to trade in intermediate goods and in particular regional value chains.

Tariffs on regional trade are generally low, as they have been progressively liberalized,

first under the auspices of the General Agreement on Tariffs and Trade (GATT)/World Trade

Organization (WTO) and subsequently in the context of regional and bilateral preferential

trade agreements. The Association of Southeast Asian Nations (ASEAN) member countries

have made significant progress in the lowering of intra-regional tariffs. The fact that tariff

liberalization alone has proven insufficient in providing genuine regional economic integration

for many developing countries has drawn further attention to non-tariff measures (NTMs) as

major determinants in developing economies growth. The use of NTMs, especially complex

technical, and sanitary and phytosanitary measures, has spread significantly. ASEAN member

countries have resolved to work on the elimination of non-tariff barriers.

1.2. NTMs and NTM data collection

A country's participation in regional and international trade in goods and services is

affected by the combination of policies such as tariffs, quantity control measures, sanitary and

phytosanitary restrictions, or technical regulations. In recent years, countries have not only


2

significantly reduced tariff levels in most lines of products, but they have also been promoting

trade facilitation, preferential market access, and aid for trade. Further attention is now drawn

on non-tariff trade regulatory measures, or NTMs, which are considered to have an impact on

the ability of countries to gain and to benefit from market access.

NTMs are policy measures, other than ordinary customs tariffs, that can potentially

have an economic effect on international trade in goods, changing quantities traded, or prices

or both (UNCTAD, 2010). NTMs thus include a wide and diverse array of policies that countries

apply to imported and exported goods. Some NTMs are manifestly employed as instruments

of commercial policy (for example, subsidies and trade defence measures), while others stem

from non-trade policy objectives for example, public heath, food safety, and environmental

protection). However, even legitimate NTMs that have non-trade objectives are thought to

have important restrictive and distorting effects on international trade.

NTMs are of particular relevance to developing countries, especially the implications

that NTMs have on their market access. One concern is that developing countries often have a

more limited capacity and incur higher compliancy costs for meeting NTM requirements in

their export markets. This is due to less advanced production process technology, weaker

trade-related infrastructure, and inadequate export services. Another concern is that NTMs

are frequently applied to product groups of particular export interest to developing countries.

Evidence shows that small and medium size enterprises and countries as well as less

developed countries are disproportionately affected by NTMs. Access to information is a

significant challenge, as many developing countries do not always have the resources to assess

the nature and implications of the NTMs that their exports face as well as of the ones they

apply to their own imports.

Understanding the uses and implications of these trade policy instruments is crucial for

the formulation and implementation of effective development strategies.

1.3. The need for NTM data collection

Despite the widespread use of NTMs, there is a significant transparency gap.

Systematic and comparable information about the use of NTMs are generally not available.

Furthermore, NTMs are complex and their effect on regional and international trade is often

indirect and very case-specific. The scarce knowledge of the implications of NTMs is

particularly troubling for policymakers, trade negotiators, and development agencies, which

need information and analysis so as to direct their efforts for maximum gains.

Chapter 1

3

Relevant information on NTMs generally originates from various regulatory agencies

and is often buried in legal and regulatory documents, which makes the gathering of relevant

data difficult and costly. The United Nations Conference on Trade and Development (UNCTAD)

classifies and collects NTM data together with its partners and regional organizations from all

over the world. UNCTAD leads and coordinates the global effort on NTMs, the Transparency in

Trade Initiative.1 The collected data are based on a comprehensive set of mandatory and

official regulations that are currently imposed by the country and that affect imported or

exported merchandise products. Detailed information for each NTM comprises the sources of

information, the measures, and the affected products and countries that have been gathered

and translated into a qualitative and quantitative database for easier access to all policy

measures that might have an economic impact on trade.

1.4. The methodology and process of NTM data collection

The collection of data on NTMs requires the classification of legal documents

(regulations, directives, and rules, among others) to appropriate predefined NTM codes. These

codes are provided in the UNCTAD publication on the Classification of Non-tariff Measures

(UNCTAD, 2013).

The classification of NTMs was developed and agreed by several international

organizations in the context of a multi-agency initiative on NTMs led by UNCTAD. The

classification is designed to facilitate the collection, analysis and dissemination of data on

NTMs, with the final objective of increasing transparency and understanding about the subject.

The data that are collected are official measures currently imposed by the country and

that affect imported or exported products. As a rule of thumb, such measures would be

checked at the customs point to allow entry or exit of the product. Every measure stemmed

from the official mandatory regulations is to be collected and classified.

1.5. Scope, coverage, and disaggregation of measures

From the text of all official mandatory regulations, any policy measure, other than

ordinary customs tariffs, which can have an economic effect on international trade, is

collected and classified. The measures cover all topics and sectors such as Agriculture, Arms

and Ammunition, and Pharmaceutical, of all Harmonized System (HS) codes ranging from

1 Joint multi-year programme launched and implemented by UNCTAD, the World Bank, the International Trade Centre, and the African Development Bank.


4

Chapters 01 to 97, and of groups of products that are covered in international conventions

such as the Rotterdam or Stockholm Conventions.

The NTM classification categorizes measures into 16 chapters (A to P) based on the

purposes of the measures. Each chapter is further differentiated into groups and subgroups,

with most chapters reaching the 2-digit level of disaggregation and others reaching the 3-digit

level.

The last chapter, Chapter P, describes the measures imposed on exported products.

Chapters A to O reflect the requirements of the importing countries for their imported

products. Chapters A to C comprise technical measures: sanitary and phytosanitary measures

(SPS), technical barriers to trade (TBT), and pre-shipment inspection as well as other

formalities. Chapters D to O cover non-technical measures such as licensing, price control,

subsidies, and rules of origin.

Box 1 presents the list of chapters with their brief descriptions.

Chapter 1

5

Box 1. Description of Each Chapter in the Classification

Chapter A on SPS measures refers to measures affecting areas such as restrictions for substances, hygienic

requirements, or other measures for preventing dissemination of diseases. It also includes all conformity

assessment measures related to food safety, such as certification, testing and inspection, and quarantine.

Chapter B on technical measures refers to measures such as labelling and other measures to protect the

environment. It also includes conformity assessment that relates to technical requirements such as

certification, testing and inspection.

Chapter C classifies the measures related to pre-shipment inspection and other formalities performed in the

exporting country prior to shipment.

Chapter D refers to contingent measures, which are measures implemented to counteract particular adverse

effects of imports in the market of the importing country, including measures aimed at unfair foreign trade

practices. They include antidumping, countervailing, and safeguards measures.

Chapter E includes licensing, quotas, and other quantity control measures, group measures that have the

intention of limiting the quantity traded, such as quotas. It also covers those licences and import prohibitions

which are not SPS or TBT related.

Chapter F includes price control measures, which are those implemented to control or affect the prices of

imported goods in order to, inter alia, support the domestic price of certain products when the import prices of

these goods are lower; establish the domestic price of certain products because of price fluctuation in domestic

markets, or price instability in a foreign market; or to increase or preserve tax revenue. This category also

includes measures, other than tariff measures, that increase the cost of imports in a similar manner (para-tariff

measures).

Chapter G concerns finance measures, referring to measures restricting the payments of imports, for example

when the access and cost of foreign exchange is regulated. This chapter also includes restrictions on the terms

of payment.

Chapter H concerns measures affecting competition. These measures grant exclusive or special preferences or

privileges to one or more limited group of economic operators. They refer mainly to monopolistic measures,

such as state trading, or sole importing agencies, or compulsory use of national services or transport.

Chapter I concerns trade-related investment measures, group measures that restrict investment by requiring

local content or requesting that investment should be related to export to balance imports.

Chapter J includes distribution restrictions, referring to restrictive measures related to internal distribution of

imported products.

Chapter K concerns restriction on post-sales services, for example, restrictions in the provision of accessory

services.

Chapter L contains measures that relate to subsidies that affect trade.

Chapter M containing government procurement restriction measures, refers to the restrictions bidders may

find when trying to sell their products to a foreign Government.

Chapter N concerns restrictions related to intellectual property measures and intellectual property rights.2

Chapter O on rules of origin, groups the measures that restrict the origin of products, or their inputs.

Chapter P includes export measures, grouping the measures a country applies to its exports. It includes export

taxes, export quotas, or export prohibitions.

Source: UNCTAD (2013).

2 Please note that those trading activities involving imitations or copies are classified in Chapter E, under E315 for

prohibition of copies or imitations of patented or trademarked products.


6

2. ASEAN NTM data collection and analysis project

The ASEAN NTM data collection and analysis project (the project) is an ambitious yet

fruitful team effort initiated by UNCTAD and the Economic and Research Institute for ASEAN

and East Asia (ERIA). The project aims to conduct thorough studies of the trade-related

legislation of all 10 ASEAN countries (Brunei Darussalam, Cambodia, Indonesia, Lao People’s

Democratic Republic (Lao PDR), Malaysia, Myanmar, Philippines, Singapore, Thailand, and Viet

Nam), to collect the NTM data and to classify the identified NTMs based on the

aforementioned methodology. A rather unique nature of the project was predetermined by its

scope, the diversity of the legal systems under consideration, accessibility of legal texts, as well

as by tight deadlines targeted by ERIA and UNCTAD.

2.1. Project's timeline

The project was initiated in late 2014 through the signing of a memorandum of

understanding between ERIA and UNCTAD with a desire to complete the undertaking by the

end of 2015. The project was finished according to the schedule (Figure 1.1), while its active

stage, including the collection and classification of the NTMs, took only 9 months, and

successfully progressed into the data analysis stage.

The first 2 months were dedicated to the selection of national consultants and their

training by UNCTAD experts. Over the next 7 months the local consultants were able to collect

and register NTM data in three consecutive batches, while the UNCTAD team was engaged in

reviewing the submissions and guiding the national consultants in incorporating UNCTAD

comments and improving the quality of data collection. Over the last 3 months, the collected

data were reviewed in their entirety, and multiple submissions were consolidated. Both the

UNCTAD team and national consultants worked on ensuring legal comprehensiveness

(including cross-checking of countries’ international obligations under conventions and

elimination of overlaps and duplication across multiple submissions by national consultants). A

meticulous work of HS classification of the affected products was also accomplished in this

stage.

Chapter 1

7

Figure 1.1. Timeline of the Project

HS = Harmonized System; UNCTAD = United Nations Conference on Trade and Development.

Source: Prepared by the authors.

2.2. Methodology of the project

Selection of local consultants and training

As mentioned above, the project was a collective effort by ERIA, UNCTAD, and selected

local consultants in each of the 10 ASEAN countries. From the inception of the project, both

UNCTAD and ERIA shared a common understanding that the selection of highly qualified

national consultants was the key to the project's success. Therefore, the best national trade

think tanks and research institutions in ASEAN countries were contacted in order to identify

suitable candidates. At the same time, ERIA and UNCTAD were also keen on obtaining support

from the respective governments. The assistance from the authorities of each country proved

to be a valuable asset for the project's comprehensiveness, which will be elaborated below.

The selected candidates of each ASEAN country had to take the UNCTAD online course

on NTM data collection and pass an online exam. The objective of the course was to provide

participants with the knowledge and tools required to identify, classify, and collect information

about NTMs in their respective countries. The course included the following five modules:

‘Introduction to NTMs and data collection’, ‘Classification of NTMs’, ‘Product classification’,

‘Guidelines for the collection of data on official NTMs’, and ‘Data classification and storage

template’. The candidates with passing grades were invited to join the project and participate

in the workshop conducted by UNCTAD.

Data analysis and preparation of the Final Report

December 2014–

January 2015

Selection of national

consultants, online course

& quizzes, preliminary

data colleciton

February 2015

Training of the selected

national consultants, workshop by

UNCTAD

22 April 2015

First submission

of the collected

NTMs data

22 June 2015 Second

submission

31 August 2015

Third submission

September–October

2015

Final review of the

collected data,

validation workshop

November–December

2015

Finalizing the HS

classification of the

affected products,

data processing


8

Data collection

Upon the formation of the national teams, national consultants began the actual NTM

data collection, which they submitted to UNCTAD for review in three batches over the span of

7 months. Each submission contained an Excel template, in which consultants registered all

the identified NTMs with their appropriate NTM codes respectively, as well as the legislation

containing those NTMs. For each submission the UNCTAD team provided thorough feedback,

identified the shortcomings and revised the wrong entries. The identification of the relevant

legislation as sources of NTMs, and the NTMs from the identified legislation was conducted

through several methods: (i) research in the publicly available sources, trade portals, legal

databases, and official gazettes, among others; and (ii) queries to the relevant government

authorities.

Scope of the project

The scope of consultants' work was limited to Chapters A-I (SPS and TBT measures;

pre-shipment inspection and formalities; non-automatic licensing, quotas, prohibitions, and

quantity-control measures other than for SPS and TBT reasons; price-control measures,

including additional taxes and charges; finance measures; measures affecting competition;

trade-related investment measures); and Chapter P (export-related measures). UNCTAD used

its own resources to cover Chapter D (contingent trade protective measures).

Difficulties encountered

The quality of submissions varied from country to country. However, the major

obstacle in achieving uniformity, coherence, and comprehensiveness of the collected data

often lay beyond the control of the national consultants. While supervising the consultants,

UNCTAD encountered the following difficulties:

1. Limited access to implementing regulations

In some countries, a general regulation may be governed further by a few implementing

regulations, which might not be readily available in the public domain or not available to

the public at all. This situation implies difficulty to collect and register corresponding NTM

data. Such situations revealed the importance of the established cooperation between ERIA,

local consultants, and national government authorities.

Chapter 1

9

2. Development level of legal systems

The legal systems in the 10 ASEAN countries are not equally developed. In the case of

Myanmar, for example, the country is currently in the process of revision and

reconstruction of its whole legal system. Presently, its legal system is a combination of laws

from several different epochs of state development, that is, British rule, those from the

time of military rule, and the most recent democratic transition periods. Accordingly, the

laws are available both in English and Burmese. Those in Burmese are often a mere

translation of the previous English written laws. Though such ‘translated’ laws could

introduce certain addenda to the British Burma legislation, the former does not necessarily

revoke the latter. Such a situation creates an obstacle for the project, as it is not clear what

scope of laws the consultant needs to collect and analyse (legal comprehensiveness).

3. Structure of legislation

Depending on the level of legal development, the legislation in the ASEAN countries vary

from non-systemized and scattered collections of legal acts to well-codified and coherent

systems of norms. While this project did not aim to evaluate legal systems or suggest any

improvements, the aforementioned diversity often does not fit into the system of

measures/regulations/documents registration developed by UNCTAD. This system implies

that certain NTMs are to be found in a regulation, which forms a part of an issued

government document (code and/or decree, among others). This model, common among

many countries around the world, is not necessarily the same in certain ASEAN countries,

where an NTM can be a single measure established under a decree enacted specifically for

this NTM. In such a situation, the terms ‘measure’, ‘document’, and ‘regulation’ may

overlap, which does not provide for the technical ease of registering NTMs and

corresponding documents and regulations.

Ensuring legal comprehensiveness

Legal comprehensiveness, that is, the entirety of collected laws and regulations,

including international obligations of each country containing NTMs, was a pivotal point in

conducting the project. The UNCTAD team, together with national consultants, used several

tools in order to ensure the comprehensiveness of the data collected. These tools included:


10

Trade Policy Reviews (TPRs) of the WTO: WTO TPRs are useful tools to identify the scope of

the relevant regulatory framework. They were the starting point of research for all ASEAN

countries except Lao PDR, for which no TPR has been conducted to date.

Generally regulated product groups: Based on the experience of UNCTAD experts, a list of

generally regulated products was established. This list includes the following product

groups: food products, animals and animal products, plants and plant products,

endangered species, controlled and hazardous chemicals, pharmaceutical products,

medicines and drugs, narcotics and psychotropic substances and precursors, biological

materials, ozone depleting substances, pesticides, fertilizers, motor vehicles, radio-

transmitting equipment, diamonds and other precious stones and metals, tobacco

products, alcoholic beverages, hazardous wastes, arms, ammunition, explosives, nuclear

materials, and dual use products. If, while reviewing the collected data, an UNCTAD expert

did not find any NTMs imposed on one of the products in the list, a national consultant

conducted additional research regarding the uncovered product.

International conventions: All of the ASEAN countries are members to several international

conventions imposing certain restrictions/requirements on importation/exportation of

certain products/substances. Depending on the legal system, ASEAN countries either

recognize direct application of those treaties domestically, or incorporate them by passing

domestic legislation that gives effect to the treaties. Some countries chose an

intermediate approach. Regardless of the type of the particular legal system, the project's

task was to identify all NTMs deriving from a country's international obligations. Among

such treaties, special attention was paid to the Montreal Protocol, the Chemical Weapons

Convention, the Basel Convention, the Rotterdam Convention, the Stockholm Convention,

the Kimberly Process, the CITIES Convention, the Single Convention on Narcotic Drugs, the

Convention on Psychotropic Substances, and the Convention against Illicit Traffic on

Narcotic Drugs and Psychotropic Substances.

Finally, the UNCTAD team conducted thorough cross-checking in order to eliminate all the

possible duplications of similar measures and double counting.

Chapter 1

11

Data processing and dissemination

The last step in the ASEAN NTM data collection methodology relates to data

processing and dissemination. Before they can be made public, the collected NTM data are

further processed and normalized by UNCTAD experts and then loaded in a central SQL server

database, the UNCTAD Trade Analysis Information System (TRAINS). This process ensures the

coherence of submitted NTM data between all worksheets. It is also needed to guarantee the

referential integrity with existing data in the central database and to make sure that all

dimensions conform to reference tables such as country codes or national product

classifications. Any inconsistency causes a failure in the uploading of the data into the TRAINS

database and consequently requires another review of the data.

The NTM data are then disseminated from the TRAINS database to several web

applications, inter alia:

1. World Integrated Trade Solution (WITS)

WITS is a web application developed by the World Bank to provide access to several

international databases on merchandise trade, tariffs, and NTMs such as the United

Nations (UN) Commodity Trade Statistics Database (COMTRADE), UNCTAD TRAINS, and

the WTO Integrated Data Base (IDB). WITS is accessible at wits.worldbank.org/.

2. Integrated Trade Intelligence Portal (I-TIP)

I-TIP is a WTO application that has been shared with UNCTAD to provide

comprehensive information on official NTMs applied in merchandise trade as well as

analytical tools. WTO I-TIP and UNCTAD ITIP are available at www.i-tip.org/ (the

UNCTAD version was launched in early 2016). The ASEAN NTM data are available at

http://asean.i-tip.org/.

References

United Nations Conference on Trade and Development (UNCTAD) (2013), Classification of Non-tariff Measures. February 2012 Version. UNCTAD/DITC/TAB/2012/2. New York and Geneva: United Nations.

United Nations Conference on Trade and Development (UNCTAD) (2010), Non-tariff Measures: Evidence from Selected Developing Countries and Future Research Agenda. UNCTAD/DITC/TAB/2009/3. New York and Geneva: United Nations.

http://wits.worldbank.org/

http://www.i-tip.org/

http://asean.i-tip.org/

13

CHAPTER 2

Non-Tariff Measures in ASEAN: A Simple Proposal3

Lili Yan Ing Economic Research Institute for ASEAN and East Asia (ERIA)

Olivier Cadot University of Lausanne, CEPR and FERDI

Rizqy Anandhika Economic Research Institute for ASEAN and East Asia (ERIA)

Shujiro Urata Waseda University and Economic Research Institute for ASEAN and East Asia (ERIA)

1. Introduction

After close to 70 years of trade liberalization, a series of recent events suggests that the

tide may well be turning. International trade as a proportion of global gross domestic product

(GDP) has stopped growing in the last decade, in what Constantinescu et al. (2015) dub the

‘Great Trade Slowdown’. Momentum for trade liberalization at the multilateral level has

stumbled on the Doha round’s failure, with limited hopes for revival. Even regional trade

agreements, sometimes seen as alternatives to multilateral liberalization, are under heavy

attack by politicians of all strides in the United States, traditionally the bulwark of free trade.

Last but not least, while the 2008–2009 global financial crisis did not lead to the explosion of

protectionism feared by many, the use of temporary trade measures by emerging countries has

been markedly rising (Didier et al., 2016).

In a volatile international political context, these converging trends should be taken

seriously. A cycle of globalization followed by a political backlash would be nothing new:

between 1870 and 1890, a rise of protectionist forces in all advanced countries nearly brought

to an end the cycle of globalization that had started in the middle of the 19th century. If trade

kept on growing because of shrinking transport costs, all countries except the United Kingdom

3 The authors are grateful for the discussion with ASEAN Senior Economic Officers.


14

erected stiff trade barriers (Bairoch and Kozul-Wright, 1996) and, more ominously, a semantic

drift in political discourses led from protectionism to xenophobia and, ultimately, war.

One key difference between now and then is the existence of the World Trade

Organization (WTO) and of its treaties, which today impose disciplines on what countries can

and cannot do, together with better knowledge of the harm that protectionism can do.

However, there is one area where WTO disciplines are comparatively weak: non-tariff measures

(NTMs).

NTMs are defined in general as policy measures, other than tariffs, that can affect

international trade. The term covers sanitary and phytosanitary (SPS) regulations, technical

barriers to trade (TBT) regulations, and a wide and diverse array of policy interventions affecting

trade flows and prices such as, inter alia, rules of origin, licensing, price-control measures, or

distribution restrictions (UNCTAD, 2013). While many NTMs stem from non-trade policy

objectives (for example, food safety or environmental protection), they can also be used as

instruments of commercial policy; even NTMs pursuing legitimate, non-trade objectives can

have restrictive or distortionary effects on international trade.

NTMs are more complex policy instruments than tariffs not just because of multiple

objectives: They are also, in themselves, technically complex (this is particularly true, for

instance, of technical and sanitary regulations). Moreover, unlike tariffs that have essentially

rent-shifting effects, NTMs can affect market structure in intricate ways (Asprilla et al., 2016).

Their opacity, the indirect nature of their effects, and the frequent involvement of the private

sector in their design make them vulnerable to capture by special interests, in particular in view

of the relatively weak disciplines that the WTO imposes on them.

Disciplines on regulations were established during the Uruguay Round, in particular in

the SPS and TBT agreements. For instance, Article 5.2 of the SPS agreement requires sanitary

regulations to be science-based. Likewise, the TBT agreement requires technical regulations to

be necessary and proportionate to the problem at hand. Taken seriously, those disciplines are

not trivial; in some cases they can even go against consensual societal choices, as in the case of

the European Union’s (EU) hormones regulation. However, many measures can still go under

the radar screen; most importantly, the system has not been tested against a general

breakdown of goodwill. Thus, in a deteriorating political environment, NTMs might prove to be

a weak spot of regional and multilateral trading systems.

For all the danger of hidden protectionism, an exclusive focus on the effect of NTMs on

trade and doing-business costs may miss an important part of their motivation and may even

Chapter 2

15

run contrary to equally important public policy objectives. In a trend that started in industrial

countries and has since spread around the world, public demand for insurance against health,

consumption-related or environmental hazards has been rising (Vogel, 1996), leading to

increased ‘regulatory demand’. Failure to respond to this public demand because of real or

alleged trade constraints would only fuel the current anti-globalization backlash.

The message of this chapter is that the solution to this dilemma is not to try – yet again

– to ‘negotiate down’ NTMs, but rather to take the issue back to the country level and to embed

it in a drive for better regulations. As the WTO’s ‘static’ (rules-based) disciplines may not prove

sufficient to ensure that regulations correctly balance regulatory demands against economic

efficiency, we argue that ‘dynamic’ disciplines should be put in place in the form of quality

control on regulatory processes. By quality control, we mean essentially two things. First, good

regulations should pass a basic test of economic rationality, that is, set correct incentives from

a societal point of view. This would weed out most of the regulations pushed by special interests

against the common good. Second, they should fully internalize externalities between different

areas of government intervention, trade-related or not; for instance, the productivity gain

expected from a subsidy to agricultural inputs (pesticides and fertilizers) should be balanced

against its environmental cost. Few governments have structures in place to do this kind of

trade-offs explicitly.

Institutionally, the quality-control systems we advocate would take the form of

regulatory supervision bodies or National Economic Council (NEC), possibly building on the NTM

committees set up under the WTO’s Trade Facilitation Agreement, with strong in-house

analytical capabilities and the power to review and screen all existing and proposed regulations.

This is the direction that Cambodia, Myanmar, and Lao People’s Democratic Republic (Lao PDR)

have been taking recently.

Because of the externalities that NTMs exert on trade partners, regional bodies such as

the ASEAN Secretariat could play a key role in encouraging and coordinating the creation of NEC

and providing common training to their staff (with support from development partners), thus

fostering a climate of regional cooperation at the technical level. In turn, technical cooperation

in the design and review of regulations would facilitate the emergence of ‘regulatory

convergence’ and thus contribute to make regional agreements mutually compatible.

Last but not least, as recent research underscores the impact of NTMs on market

structure, NEC should ultimately be merged with competition commissions in order to

coordinate regulatory and anti-trust supervision, which deal with similar issues and draw on


16

similar staff skills. Combined regulatory and antitrust supervision bodies would have more

resources and clout, having a balanced view and mandate to discipline both the private and the

public sectors.

Against this background, this chapter provides an overview of the state of play in the

Association of Southeast Asian Nations (ASEAN) member states in the area of NTMs4, together

with an outline of the proposed policy architecture. Section 2 discusses conceptually the

channels through which NTMs affect trade and market structure. Section 3 describes recent

trends in tariffs and non-tariff measures in ASEAN, detailing non-tariff measures in ASEAN by

type of NTM, issuing agency, and product. Section 4 outlines our key policy proposal. Section 5

concludes.

2. How NTMs affect trade and market structure

The costs imposed by NTMs on businesses can be decomposed into three broad classes:

enforcement costs, sourcing costs, and process-adaptation costs. In this section, we argue that

these costs affect simultaneously trade flows and market structure. Beyond ‘economies of

scope’ at the level of supervisory agencies, this linkage between trade and market-structure

effects is our rationale for proposing joint regulatory and antitrust supervision.

Enforcement costs relate to the effort that private companies must expend to show

compliance with NTMs. This may involve staff devoted to processing paperwork, inspections by

officials from enforcement agencies, or efforts to encourage the certification of foreign

suppliers under national standards. Because these costs are largely fixed, they weigh more

heavily on small firms than on larger ones. They might also weigh more heavily on foreign firms

less familiar with local administrative processes, although foreign firms tend to be larger ones

who can purchase legal/consulting assistance locally. Thus, through enforcement costs, NTMs

may affect differentially local vs. foreign firms and small vs. large ones.

Sourcing costs are generated by the switch from low-grade intermediate sources to

high-grade ones in order to meet NTM standards. A given standard can have different effects

depending on products and users. For instance, Indonesia’s steel standard, adopted in 2009, set

maximum levels of carbon, manganese, phosphorous and sulphur for flat products and hot-

rolled coils. For users of low-grade long products in the construction sector (Harmonized System

[HS] code 7207), the standard was binding and involved changes in procurement choices. By

4 A previous study on NTMs in ASEAN using the 2009 ASEAN NTM database, Cadot, et al., 2015.

Chapter 2

17

contrast, for users of high-grade flat products in the automobile industry (HS code 7208),

company standards were generally higher than those mandated by the regulation, so no

sourcing changes were involved. In their case, supplier certification requirements, being

redundant, were perceived as just a nuisance.

Sourcing costs are essentially variable costs, as they affect every unit produced. If the

standard is non-discriminatory, they affect domestic firms and importers in the same way.

However, intermediate producers from different countries may have unequal abilities to comply

with NTMs due to variations in the effectiveness of national SPS and quality infrastructure. As a

result, an NTM may affect sourcing patterns with complex effects. For instance, Mauritius’

regulation on pigments used in paints forced domestic producers to switch from their traditional

supply sources to more expensive German-made pigments. In general, Disdier et al. (2015) show

that harmonization clauses in North-South agreements, which typically mean a stiffening of

standards for the Southern partners, tend to reduce South-South trade. This ‘shutting-door’

effect on imports from Southern third-party suppliers may be so large as to raise the profitability

of home intermediate producers, as was the case in Morocco after harmonization with EU

standards (Augier et al., 2016).

Process-adaptation costs relate to changes in capital equipment needed to meet NTM

standards. For instance, dairy standards force farmers to buy expensive equipment to ensure

that milk is not contaminated by bacteria before being pumped into tank trucks. Investment in

compliant capital equipment typically requires also the upgrading of operator skills. These costs

are similar to the costs typically incurred by firms when they start exporting. They involve the

hiring of white-collar workers and engineers and, most importantly, higher skill levels in every

occupation (Verhoogen, 2008; Bustos, 2011).

Process-adaptation costs are essentially fixed costs and therefore affect small firms

more than larger ones, again potentially affecting market structure. This market-structure effect

can interact in subtle ways with traditional rent-shifting effects. To see this, consider a world

with symmetric firms and transport costs. Because of transport costs, firms sell systematically

smaller volumes on their export markets than on their home markets. Suppose now that each

country sets a particular (different) standard. Then firms spread country-specific process-

adaptation costs on smaller volumes on their export markets than on their home markets; it is

as if home firms were always larger than foreign ones, in spite of the initial symmetry. In that

case, NTMs mechanically generate a home bias even if they are not de jure discriminatory. The

picture becomes more complex with heterogeneous firms, as process-adaptation costs induce


18

the exit of the smallest firms, both foreign and domestic, allowing larger ones (again both

foreign and domestic) to expand market shares. As a result, foreign firms may find themselves

better off, a conjecture that is documented empirically by Asprilla et al. (2016).

If quality upgrading takes place on a sufficiently large scale in the economy (say, because

a wave of new NTMs are adopted following a trade agreement) the complementarity between

recent-vintage capital and skills can raise the skill premium in the whole economy, resulting in a

widening of wage inequalities between educated and non-educated workers. This effect,

documented in the case of an expansion of export opportunities by Bustos (2011), can induce a

sorting of firms, with the largest upgrading and expanding, while the smallest are forced to exit,

squeezed by the NTM’s requirements and the rising cost of skilled manpower.

While the scale of these effects varies across contexts and is, as yet, not widely

documented, a good rule of thumb is that variable costs matter for aggregate trade flows while

fixed costs matter for market structure.

The underlying reasoning is illustrated in Figure 2.1. Consider a two-country world

where country A imposes an NTM affecting B’s exporters. Figure 2.1 plots the frequency of B’s

exporters (f) and the corresponding cumulative trade flow (g) as a function of a parameter

indexing both their productivity and their size. The shape of f is chosen to correspond loosely to

a Pareto distribution (Freund and Pierola, 2015); intuitively, as increases, the density of firms

goes down (there are fewer firms at high levels of productivity). By contrast, g is upward-sloping

and concave because, as one adds increasingly larger/more productive firms, each contributes

more and more to aggregate output.

Figure 2.1 illustrates qualitatively the NTM’s effect on fixed and variable costs. An

increase in fixed costs induces the exit of firms between min and *, shifting the g function

horizontally from g0 to g1. This extensive-margin effect alters the market’s structure. However,

even if the exit movement is large (as shown), the effect on trade flows is small because the

exiting firms represent a small fraction of the aggregate flow (although the horizontal shift of

the g function is large, it vertical shift is small). By contrast, an increase in variable costs affects

the whole distribution, rotating g from g0 to g2, including the top firms that account for the bulk

of trade flows.5 Thus, market structure does not change (all firms reduce their flows

proportionately), but aggregate flows change markedly.

5 Freund and Pierola (2015) document that the top 1 percent of firms account for roughly half of export flows.

Chapter 2

19

Figure 2.1. Fixed-cost and Variable-cost Effects with Heterogeneous Firms

Source: Cadot and Ing (2015).

The argument illustrated above has important implications for the empirical analysis of

NTMs and its policy implications. Currently, practically all work on NTMs is focused on estimating

their ad-valorem equivalents (AVEs) based on how they affect trade flows. The idea is to use

AVEs estimated by product and country as a basis for the calculation of welfare gains to be

expected from trade agreements through the use of computable general equilibrium (CGE)

models, and as a basis for negotiated reductions. This approach can be misleading due to:

First, as illustrated here, effects on trade flows are only part of the story; effects on

market structure may be equally important. In other words, a 10 percent reduction in trade

flows can have very different implications if it is an equi-proportionate reduction in the exports

of all active firms or if half the firms exit the market, leaving the remaining ones with expanded

market shares and reinforced market power (Asprilla et al., 2016).

Second, AVEs measure only the gross costs of NTMs, although the WTO’s necessity and

proportionality tests logically imply that society should be concerned by their net cost, that is,

by the difference between regulatory costs and benefits.6 The benefits of SPS regulations can

be, for instance, fatalities and diseases avoided, which can be priced statistically through a

variety of techniques (see for example, Hall and Jones, 2007). Likewise, environmental benefits

6 The recall of nearly eight million vehicles from ten automakers including Toyota and of more than five million from Honda since 2013, through national and regional actions for the potentially deadly Takata airbag inflators, the 2015 discovery of Volkswagen’s large-scale cheating with US emissions tests, or Singapore’s February 2016 ban on Mars chocolate products due to the possible presence of plastic, serve as reminders that regulatory benefits (or, alternatively, the costs of non-enforced or ineffective regulations) might well be substantial relative to lost ‘Harberger triangles’.


20

can be evaluated for example, through the valuation of ecosystem services (Pearce et al., 2006).

However, in spite of the availability of analytical tools, regulatory benefits are rarely quantified

(Renda et al., 2013). With only one-sided quantification, NTM rankings in terms of their gross

costs (AVEs) could be very distorted, leading to biased CGE estimates of the welfare gains from

trade agreements. As a result, CGE estimates may provide poor guidance to policymaking and

hence to negotiations. AVEs estimates of NTMs should be accompanied by benefit analyses to

be included in CGE/GTAP simulations.

All in all, our message here is that NTMs, which are currently viewed primarily through

a trade-only prism, might well be viewed instead from a triple angle: (i) trade (the traditional

one), (ii) competition policy, and (iii) public-good provision and valuation. Against this

background, we now turn to a description of the state of play in ASEAN in terms of NTMs.

3. Recent trends in tariffs and non-tariff measures in ASEAN

Import tariffs have been successfully reduced through multilateral and regional

negotiations, with ASEAN tariffs declining from 8.9 percent in 2000 to 4.5 percent in 2015. By

2010, tariffs had been outright eliminated on 98 percent of the product lines in the ASEAN-6

countries7, with Cambodia, Lao PDR, Myanmar, and Viet Nam to follow by 2018.

In spite of these tariff reductions, intra-ASEAN trade increased merely from 23.0 percent

of member states’ total trade in 2000 to 25.3 percent in 2014, with ASEAN Trade in Goods

Agreement preferences suffering from chronic under-utilization. Besides rules of origin (Cadot

and Ing, forthcoming), NTMs, whose number swelled from 1,634 to 5,975 between 2000 and

2015 may be the ‘missing factor’ explaining the slow rise of intra-ASEAN trade.

Indeed, most traded products are today covered by one measure or another. Table 2.1

shows coverage ratios, that is, the percentage of imports covered by one measure or another,

using whichever source of trade data is available (direct or mirrored). Coverage ratios are all

high, with a number of countries having all imports covered (100 percent coverage ratios).

7 The ASEAN-6 are Brunei Darussalam, Indonesia, Malaysia, the Philippines, Singapore, and Thailand.

Chapter 2

21

Table 2.1. NTM Import Coverage Ratios in ASEAN, 2015

ASEAN = Association of Southeast Asian Nations; Lao PDR = Lao People’s Democratic Republic; NTM = non-tariff measure. Notes: a/ Simple tariff line means we treat 1 NTM in national tariff line as 1 NTM in 6-digit Harmonized System (HS) code. b/ Weighted tariff line means we treat 1 NTM in national tariff line as 1 divided by number of national lines in the respective 6-digit HS code. c/ Trade year used is based on latest available import data for HS-6 digit from WITS, World Bank.

ASEAN’s high coverage ratios reflect a spectacular rise in the number of NTMs during a

period where tariffs, both most favoured nation (MFN) and preferential, were steadily cut

(Figure 2.2). One can read the scissor-blade movement in tariffs and NTMs apparent in Figure

2.2 in two alternative ways, with sharply different implications.

NTM

Coverage (simple

average)a

NTM Coverage (weighted average)b

Trade Year Usedc Remarks

Brunei Darussalam

65% 57% 2014

Cambodia 100% 100% 2014 (mirrored) NTMs on all products since 2008

Indonesia 75% 70% 2014 Lao PDR 100% 100% 2014 (mirrored) NTMs on all products since 2012

Malaysia 71% 69% 2014 Myanmar 42% 42% 2014 (mirrored) Philippines 100% 100% 2014 (mirrored) NTMs on all products since 1976

Singapore 100% 100% 2014 NTMs on all products since 1999

Thailand 100% 100% 2014 NTMs on all products since 1992

Viet Nam 100% 100% 2014 NTMs on all products since 2007


22

Figure 2.2. Trends of Tariff and Non-tariff Measures in ASEAN, 2000–2015

ASEAN = Association of Southeast Asian Nations; NTM = non-tariff measure; SPS = sanitary and phytosanitary; TBT = technical barriers to trade. Source: Authors’ calculation based on 2015 ASEAN-ERIA-UNCTAD Database.

First, the number of NTMs could have risen as a substitute for shrinking tariffs. The

substitutability of tariffs and non-tariff barriers (NTBs) is an old idea in trade theory and empirics

(Deardorff and Stern, 1997). The idea is that, as tariffs are constraints by bindings (although, for

many developing countries, there is substantial water in the tariffs) or by regional commitments,

countries may resort to NTBs to perform an equivalent protectionist function. Observing such

substitutability in ASEAN data between tariffs and the broad array of measures called NTMs

(which include many measures that are not NTBs) might betray an intention to use them as

trade-protection instruments to replace tariffs; we will call this the ‘political-economy (PE)

hypothesis’.

Alternatively, shrinking tariffs (opening up) and expanding numbers of NTMs (regulatory

expansion) are two parallel symptoms of a modernizing economy, with consumers demanding

both more product variety and more product safety. This hypothesis is in line with both theory

and empirics. It has been observed that the average unit value of a country’s imports tends to

Chapter 2

23

rise with its level of income (Hummels and Lugovskyy, 2009). Thus, with or without standards,

consumers naturally tend to switch to higher-quality and safer products when their incomes

rise. Expanding regulations may simply reflect this shift in preferences, as risk-averse regulatory

agencies seek to minimize the risk of incidents in increasingly mediatized and safety-sensitive

environments. As for the negative relationship with tariffs, first note that trade liberalization

may reflect a growing demand for product variety as incomes rise. In that case, the correlation

between trade liberalization (decreasing tariffs) and regulatory inflation would reflect a

common factor (rising income). But there may be also a direct causal mechanism. As trade

liberalization leads to more variety in terms of import sources, quality heterogeneity can be

expected to rise (unit values vary not just by importer income but by exporter income as well;

see Schott 2004, and Bernard et al., 2011); in particular, as market access improves for low-

income exporters with deficient SPS and product-safety infrastructure, importing countries may

choose to scrutinize imports more carefully. In that case, trade liberalization leads to import-

quality heterogeneity which itself causes regulatory controls. Whether due to a common factor

or to a direct causal mechanism, we will call this the ‘income-effect (IE) hypothesis’.

The breakdown by type of measure shown in Figure 2.2 helps to discriminate between

the PE and IE hypotheses. Under the IE hypothesis, NTM inflation should be attributable

primarily to instruments targeting the quality of products – SPS and TBT regulations. Figure 2.2

shows that this is true on average; indeed SPS and TBT measures together account today for

76.3 percent of the stock of NTMs (Table 2.2 and 2.3).


24

Table 2.2. NTMs by Type in ASEAN, 2015

ASEAN = Association of Southeast Asian Nations; NTM =non-tariff measure. Source: Authors’ calculation based on the 2015 ASEAN–ERIA–UNCTAD Database.

Table 2.3. NTMs by Type and by Country in ASEAN, 2015

Country Total SPS TBT Export-related

Measures (%) Others (%)

(number) (%) (%)

Brunei Darussalam 516 31 56 9 4

Cambodia 243 15 50 29 7

Indonesia 638 20 51 12 18

Lao PDR 301 13 30 27 30

Malaysia 713 36 47 10 7

Myanmar 172 44 24 20 12

Philippines 854 27 42 17 13

Singapore 529 24 59 9 7

Thailand 1630 48 34 8 9

Viet Nam 379 37 37 17 8

Total/average 5,975 29 43 16 12

ASEAN = Association of Southeast Asian Nations; Lao PDR = Lao People’s Democratic Republic; NTM = non-tariff measure; SPS = sanitary and phytosanitary; TBT = technical barriers to trade. Source: Authors’ calculation based on the 2015 ASEAN–ERIA–UNCTAD Database.

Code NTM by Type Number of

NTMs %

A Sanitary and phytosanitary (SPS) measures 1,984 33.2%

B Technical barriers to trade TBT) 2,573 43.1%

C Pre-shipment inspection and other formalities 153 2.6%

D Contingent trade protective measures 112 1.9%

E

Non-automatic licensing, quotas, prohibitions and quantity control measures other than SPS or TBT reasons 159 2.7%

F Price control measures including additional taxes and charges 195 3.3%

G Finance measures 15 0.3%

H Measures affecting competition 16 0.3%

I Trade-related investment measures 0 0.0%

J Distribution restrictions 2 0.0%

K Restriction on post-sales services 0 0.0%

L Subsidies (excluding export subsidies under P7) 0 0.0%

M Government procurement restrictions 0 0.0%

N Intellectual property 0 0.0%

O Rules of origin 0 0.0%

P Export-related measures 766 12.8%

Total coded NTMs 5,975 100%

Chapter 2

25

Figure 2.3 reproduces Figure 2.2 by ASEAN member country. Trends by county offer a

diverse picture in terms of profile and timing of the decrease in tariffs and concomitant rise in

NTMs, although the overall trend is qualitatively the same for many. Interestingly, Singapore has

seen a rise in the number of its NTMs (today, Singapore has 529 measures covering the entirety

of its imports) even though it had no tariffs to eliminate at the start (Singapore, a service

economy, also has relatively few manufacturing jobs to protect). Thus, the PE hypothesis cannot

hold in the case of Singapore. Indonesia, Malaysia, and the Philippines are three cases of

moderate decreases in preferential tariffs with largely unchanged MFN ones. In all three cases,

the rise in the number of NTMs has been steady, albeit from a high base in Malaysia. Cambodia,

Viet Nam, and Thailand have undergone more energetic tariff reductions as all three started

from high levels. They have also had substantial rises in the number of NTMs. Other cases

(Myanmar, Lao PDR, Brunei Darussalam) are in between or have idiosyncratic profiles.

In terms of composition, the rise in NTMs is driven by SPS and TBT measures in the

Philippines, Singapore, Thailand and Viet Nam. By contrast, in Cambodia, Indonesia, Myanmar,

and Lao PDR, export-related and other measures that have nothing to do with product safety

have also been on the rise, suggesting more support for the PE hypothesis.

Figure 2.3. Tariffs and Non-tariff Measures by ASEAN Member, 20002015

(a) Brunei Darussalam (b) Cambodia

00.511.522.533.544.5

0

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26

(c) Indonesia (d) Lao PDR

(e) Malaysia (f) Myanmar

(g) Philippines (h) Singapore

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00.10.20.30.40.50.60.70.80.91

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Tariff (%)Number of

NTMs

Chapter 2

27

(i) Thailand (j) Viet Nam

ASEAN = Association of Southeast Asian Nations; Lao PDR = Lao People’s Democratic Republic; NTM = non-tariff measure. Note: Number of NTMs measured on the LHS; tariff (in %) measured on the RHS. Colour coding of NTMs and tariff

types is as in Figure2.2. Sources: Authors’ calculations based on COMTRADE data on tariffs and 2015 ASEAN–ERIA–UNCTAD NTM Database.

A breakdown of the number of measures by product category in Table 2.4 also suggests

a mixed picture. Among the most heavily regulated products (three or more NTMs), one finds

both products that are clearly sensitive from a public-health perspective (animal products,

foodstuffs, chemicals) but also products where the rationale for state regulation is less clear.

For instance, machinery/electrical equipment covers sensitive products such as consumer

electrical equipment and appliances but also machinery, a highly differentiated category of

products typically purchased by corporate buyers with the capability to assess quality by

themselves, perhaps even better than government agencies. Yet it is one of the most heavily

regulated sectors. It is also, together with automobile (another heavily regulated sector) an

important provider of jobs in middle-income countries, and hence a strategic sector from a PE

perspective. Textiles is also an economically strategic sector but one where safety standards are

of secondary importance; yet it is substantially affected by NTMs.

0

2

4

6

8

10

12

14

16

18

20

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1400

1600

1800


02468101214161820

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400

Tariff (%)Number of

NTMs


28

Table 2.4. NTMs by Product Group and by Number of Measures in ASEAN, 2015

ASEAN = Association of Southeast Asian Nations; HS = Harmonized System; NTM = non-tariff measure. Source: Authors’ calculation based on the 2015 ASEAN-ERIA-UNCTAD Database.

Table 2.5 sheds additional light on the issue by looking at who is responsible for the

issuance of NTMs. Under the PE hypothesis, one would expect trade and industry ministries to

account for a substantial fraction of NTMs. By contrast, under the IE hypothesis one would

expect the health and environment ministries to loom large. Measures issued by agriculture

ministries could fit under both hypotheses, as agri-food products are both health sensitive and

the object of strong protectionist pressures. Health and environment ministries together

account for about one-third of all NTMs (34.3 percent). By contrast, trade and industry

ministries account for less than 15 percent of the measures. Thus, a raw count of where

measures originate from suggests more weight for the IE hypothesis.

HS Code

Product Group

Affected by 1 NTM

Affected by 2 NTMs

Affected by 3 NTMs or more

01-05 Animal & animal products 0% 0% 7%

06-15 Vegetable products 0% 0% 8%

16-24 Foodstuffs 0% 0% 6%

25-27 Mineral products 0% 0% 2%

28-38 Chemicals & allied industries 2% 2% 9%

39-40 Plastics/rubbers 1% 1% 2%

41-43 Raw hides, skins, leather, & furs 0% 0% 1%

44-49 Wood & wood products 0% 1% 6%

50-63 Textiles 1% 2% 6%

64-67 Footwear/headgear 0% 0% 0%

68-71 Stone/glass 1% 1% 1%

72-83 Metals 1% 2% 4%

84-85 Machinery/electrical 3% 6% 11%

86-89 Transportation 1% 1% 5%

90-99 Miscellaneous 1% 1% 3%

Chapter 2

29

Table 2.5. NTMs by Issuing Agency in ASEAN, 2015

ASEAN = Association of Southeast Asian Nations; NTM = non-tariff measure. Note: Data on measures of Antidumping, countervailing duties and safeguards are provided by the WTO. The WTO

does not issue any regulations. Source: Authors’ calculation based on the 2015 ASEAN-ERIA-UNCTAD Database.

All in all, this brief overview of NTMs in ASEAN suggests that exclusive focus on the PE

hypothesis is unlikely to do justice to the variety of motivations that preside, across countries,

over the issuance of NTMs.

The data in Table 2.5 also highlight one of the distinguishing features of NTMs; namely,

that authority over them, unlike tariffs, is fragmented and spread over a large spectrum of

government agencies. Moreover, these agencies have different mandates, and their personnel

are unlikely to have much in common in terms of training or vision. Thus, the narrow, trade-

centred prism through which economists look at NTMs stands in sharp contrast with the diverse

constituencies that have a say in their making. This may be one of the reasons why they are still

so poorly understood.

Also, the fragmentation of authority over NTMs may reproduce at the country level a

problem that has been long noticed at the supra-national level. When a country adopts a trade-

policy measure, NTM or other, it is likely to affect its trade partners in one way or another.

Without a supra-national coordination mechanism, these so-called ‘externalities’ would not be

taken into account in national decision-making, and the outcome would not be collectively

optimal. The WTO, its agreements, and its dispute-settlement body provide a forum and

mechanism to discuss and internalize the externalities.

Number Ministry/agency Number of

NTMs

Total Number of NTMs

(%)

1 Ministry of Health 1868 31.3%

2 Ministry of Agriculture (including forestry, plantation, fisheries) 1865 31.2%

3 Ministry of Trade 468 7.8%

4 Other institutions (other institutions in countries' table) 463 7.7%

5 Ministry of Industry 425 7.1%

6 Ministry of Environment, environmental agencies 178 3.0%

7 Cabinet office, State Secretary 175 2.9%

8 World Trade Organization (provided by WTO) 87 1.5%

9 Ministry of Finance 86 1.4%

10 Ministry of Energy, and related agencies on energy 64 1.1%

11 Other institutions 296 5.0%

Total NTMs 5,975 100%


30

A somewhat similar – if less acute – coordination problem exists within countries in the

area of NTMs. While all the agencies that form a government share, in principle, a stake in the

pursuit of the common good, each has, in practice, a particular and possibly narrow mandate.

While measures (in particular, NTMs) taken by one agency may well have implications that spill

over to other areas, there is typically no forum or mechanism to discuss and resolve them.

Spillovers (say, from environmental protection to competitiveness, or from liberalization to

product safety) are typically ignored, or, when recognized, solved in ad-hoc fashion by

bargaining between ministries, with the most powerful one winning the case. Correctly resolving

the trade-offs generated by cross-area spillovers would require, instead, an institutional setup

geared toward their explicit recognition and their resolution in the pursuit of the common good

rather than through bargaining.

4. A simple proposal

Our brief and very preliminary overview of the state of play in NTMs in ASEAN suggests

that neither the PE hypothesis nor the IE one can be ruled out with certainty. Therefore,

appropriate policy guidance should take into account both types of motivations and offer a

balanced policy mix with both ‘disciplines’ in a traditional trade sense and tools to facilitate

trade-offs between conflicting objectives at the sub-national (agency) level.

The WTO SPS and TBT agreements offer rules that governments can rely on to solve

certain trade-offs. They are useful, but they are not enough, because rules are never ‘complete

contracts’ – they cannot cover all possible situations. What we propose here is to complement

the rules with a standard institutional set up which, up to a certain degree of adaptation to fit

national realities, could provide a common blueprint to resolve trade-offs and ensure regulatory

coherence both within and between countries.

The setup is simple. We establish a National Economic Council (NEC) (the name can vary

in each country) that has a direct mandate from the president or prime minister. It consists of

related in-line ministers and high-level government officials with a technical secretariat. The

mandate is to review and design strategic trade and investment policies and regulations. The

NEC consists of divisions of trade facilitation, NTMs, national single window, investment

procedure and regulations, and free trade agreements/ economic cooperation.

The NTM division will review all existing and upcoming NTMs. The key aspect of our

proposal is the NEC’s technical secretariat. In order to add value, the NEC needs two things.

First, to be endowed with independent research capabilities in order to identify where real

Chapter 2

31

problems are and recommend feasible and socially optimal solutions. For that, the secretariat

must be staffed with knowledgeable economists and trade and investment lawyers capable of

conducting logical, factual, and quantitative analysis and of defending it effectively, which also

requires a mixture of junior and senior staffing. Second and equally important, it needs to have

a dispute settlement mechanism capable of resolving disputes for the common good and not

just through bargaining.8 This may entail either a collective-decision procedure or higher-level

arbitrage, or both.

The proposed setup is illustrated in Figure 2.4. The left-hand side of the figure shows

the entry points into the process, which may include suggestions from private sector, non-

government organizations, and other segments of civil society. It is also important that the NEC

be allowed to seize cases on its own initiative, in particular in the early stages of its life where it

may have low visibility and private-sector complaints may be slow to come. The upper part of

the figure shows higher levels (for example, president or prime minister’s office), which may be

where all reviews and decisions on trade and investment policy and regulations will be agreed

and set. Colour codes illustrate possible areas of NEC competence, although more can be

included, in particular through a merger with the antitrust body (more on this below).

8 There is a parallel here with the evolution of dispute-settlement at the WTO. While the first panels resolved disputes essentially through bargaining in order to avert the recourse to force, with time, the system evolved toward third-party arbitration, and ultimately to one where disputes are resolved in a way that ensures consistency, see Jackson (1997).


32

Figure 2.1. Proposed Institutional Setup

NGO = nongovernment organization. Source: Prepared by the authors.

The setup illustrated in Figure 2.4 is merely a blueprint. Although an appropriate

institutional setup is key, an NTM streamlining process, like any reform process, is only worth

the political goodwill and commitment that is placed in it. The case of Mexico is telling in this

regard. The drive for regulatory reform in Mexico came in early 1995 when the December 1994

‘Tequila Crisis’ underscored the need to modernize the economy. The country embarked in a

top-down regulatory reform driven by a small group of technocrats with strong support from

the presidency. The process was institutionalized through the creation of a regulatory-

simplification agency, the Unidad de Desregulacion Economica (UDE), placed under the

Secretariat of Trade’s authority, but given, by presidential decree, a broader authority than the

secretariat itself. UDE gathered credibility and clout by starting with ‘low-hanging fruits’ –

regulatory reforms that were easy and widely seen as urgent – and then embarked on an

ambitious reform agenda. UDE required all ministries not just to notify regulations, but also to

justify them, leading to the outright elimination of 45 percent of all regulations (many of them

useless). UDE was then transformed into a formal federal agency, Comisión Federal de Mejora

Regulatoria or Federal Commission on Regulatory Improvement (COFEMER), with a staff of 60

professionals, a budget of $5 million, and an independent status with a president-appointed

head. The law’s objective was to ensure that new regulations would obey transparency and

rationality standards. However, in spite of the reform’s institutionalization, it was only as strong

NEC

Chapter 2

33

as the president’s political backing. When elections returned a hostile parliamentary majority,

partisan politics and reform fatigue in the face of disappointing growth eroded political support

for further regulatory reform. In 2003, COFEMER lost a key battle against the

telecommunications sector; the same year, its head was abruptly replaced, and it lost most of

its clout (Cadot, 2015). Mexico’s regulatory reform emphasized deregulation because of its

particular legacy of over-regulation. As we made clear at the outset, the present chapter does

not promote de-regulation as a universal fix; quite the opposite—our premise is that regulations

are a basic and legitimate public demand that should be taken as a given. What Mexico’s story

of reform and backtracking highlights, instead, is the need to ensure that the reform process –

whatever its ultimate aim— gathers clout as it matures, rather than lose steam in increasingly

difficult battles.

In order for the process to be anchored and stable, it needs what was partially lacking

in Mexico – outside support and commitment. The ASEAN Secretariat has a key role to play in

this regard in setting up regional dynamics that encourage and fuel the NTM streamlining

process simultaneously in several – if not all – member states. Support could come through

common training and technical assistance, possibly with the involvement of development

partners. Familiarity acquired through common training would have the added advantage of

fostering the emergence of a common vision among national NEC, facilitating informal

communication at the technical level between commonly-trained staff in different NEC.

Technical cooperation between staff at similar levels of responsibility, and below the radar

screen of the media and politicians, was the hallmark of Franco–German cooperation in the

early days of European integration; it proved a powerful tool to prevent tensions. In an ASEAN

context, it would facilitate regional regulatory coherence and could also contribute to

convergence across overlapping blocs (for example, ASEAN and TPP) through the adoption of

regulatory best practices.

Ultimately, the reform process should lead to a convergence of regulatory supervision

and antitrust. Regulations do harm when they create monopoly positions. In turn, to be stable,

monopoly positions often need regulatory barriers to entry. We already discussed in this chapter

how NTMs affect market structure. This interdependence needs to be recognized explicitly and

‘internalized’. The best way to do this would be to have a single regulatory and antitrust

supervision body (e.g. National Economic Council, NEC). This would have two key advantages.

First, it would leverage economies of scale, as the staff skills needed for antitrust and regulatory

analysis are broadly of the same nature – law and economics and, within economics, ‘industrial


34

organization’. Second, a joint NEC with both the private and public sectors under its supervision

would be perceived as more balanced than either of its components, which would contribute to

its clout.

5. Concluding remarks

We argued in this chapter that the belief, widely shared in the trade community, that

NTMs can be somehow ‘reduced’ through trade negotiations, is doomed. Many NTMs are not

just trade instruments – notwithstanding the analogy with tariffs that is implicit in their name.

Regulatory systems have become increasingly risk-averse in a mediatized and safety-conscious

world; not only will NTMs not be reduced – they will keep on proliferating. Because of their

potential dual use (for consumer-safety and job-protection purposes) and the relatively weak

disciplines to which they are subjected, their proliferation creates a systemic risk for regional

and multilateral trading systems. However, finger pointing is counterproductive, as NTM

reforms are held back by the perception that they would be concessions to trade partners, like

tariff reductions, and should therefore be undertaken only as part of a negotiated quid pro quo.

What we propose, instead, is to take back NTM streamlining to the country level, with

the ASEAN Secretariat providing support in various ways, e.g. through regular NTM reviews at

the regional level. Regional disciplines on transparency also have a key role to play, together

with momentum toward mutual recognition and, whenever feasible, harmonization. The key

aspect of our proposal is its dynamic aspect: instead of rules and constraints, we propose the

adoption of simple institutional setups at the country level that would be conducive to the

emergence of best practices. These could be called ‘dynamic disciplines’.

Practically, a possible roadmap to implement our proposal would blend regional and

multilateral approaches. At the multilateral level, the WTO’s Trade Facilitation Agreement

mandates that each country set up a trade portal and a trade facilitation committee. An

ambitious reading of the agreement would make the trade portal an open-access repository of

all NTMs, in local languages and in English. This would be a tremendous step towards

transparency, and it would be politically acceptable if it were clear that posting was not the first

step toward negotiated elimination. Likewise, trade facilitation committees could be used as

stepping-stones towards the creation of our proposed National Economic Council, coordinating

trade facilitation, non-tariff measures, national single windows, investment and trade-related

regulations and procedures. Thus, the streamlining and harmonization of NTMs would make

Chapter 2

35

headway at all three levels—national, regional and multilateral, contributing to (paraphrasing

Baldwin and Thornton, 2008 and Baldwin and Kawai, 2013) “multilateralize” Asian regionalism.

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37

CHAPTER 3

Classification of Non-tariff Measures in Brunei Darussalam9

Christina Ruth Elisabeth Center for Inclusive and Sustainable Development, Prasetiya Mulya School of Business and

Economics, Indonesia

1. Overview of Brunei Darussalam’s economy

Brunei Darussalam (hereinafter, Brunei) has one of the highest levels of income per

capita in Southeast Asia with the lowest population and abundant oil and gas resources.

However, in the last decade, Brunei had the lowest economic growth rate in the region due to

its dependence on the oil and gas sector. The sector contributes more than 60 percent of its

gross domestic product (GDP) and more than 90 percent of its exports (OECD, 2014).

Brunei’s dependency on oil and gas caused the government to have a significant role,

while limiting the role of the private sector. This condition is further strengthened by the

combination of high wages and low productivity of the private sector that makes the private

sector is uncompetitive internationally (Lawrey, 2010).

Realising this condition, on January 2008, the Brunei government issued a long-term

development policy package, known as Wawasan Brunei 2035 (Vision Brunei 2035). The policy

consisted of a structural development package to accelerate sustainable economic growth. The

emphasis of the package is to accelerate economic growth through high productivity to achieve

the target of 6 percent average annual economic growth. High economic growth was expected

to come from economic diversification and an increasing role of the private sector.

In order to support the structural programme, the government promotes investment

inflow in the export-oriented and labour-intensive sectors. Those sectors are agri-food,

downstream oil and gas and energy-intensive industries, information and communication

technology, life sciences (pharmaceutical, cosmetics, and functional health food and health

supplements); light manufacturing, services such as financial services, logistics, and tourism and

9 The author would like to thank B. Realino Yudianto (Center for Inclusive and Sustainable Development, Prasetiya Mulya) for his useful assistance in collecting the regulations and Steven Leonardo (Prasetiya Mulya) for his dedicated assistance in data processing.


38

activities that may be driven by technology development (Brunei Economic Development Board

website).

Recently, Brunei has viewed the regional partnership as a complement of multilateral

partnership. The regional trade agreements (RTAs) have increased market access and

investment to support economic diversification. In 2013, merchandise trade with RTA partners

consisted of 75 percent of Brunei’s imports and 99.6 percent of its exports.

In 2013, the ratio of merchandise trade (exports and imports) to GDP was 104.1 percent.

Mineral fuels, which include petroleum and natural gas, represented 96.5 percent of total

merchandise exports. The remaining exports are manufactured goods, led by machinery and

transport equipment (1.1 percent of total merchandise exports in 2013) and chemicals (0.8

percent) Brunei's merchandise exports are mainly destined for the East Asian region. Japan

remains Brunei's largest export partner, followed by the Republic of Korea (WTO, 2015).

Brunei's imports were dominated by manufactured goods; the most important category

was machinery and transport equipment, accounting for 36.6 percent of total imports in 2013

followed by other manufactured imports such as chemicals. The share of food in total

merchandise imports increased from 12.3 percent in 2008 to 13.3 percent in 2013.

Most of Brunei's merchandise imports came from East Asia, with Malaysia accounting

for the largest source of imports, 21.9 percent, and followed by Singapore at 19.1 percent in

2013. Imports from ASEAN countries accounted for 50.9 percent in 2013.

Currently, Brunei applies low tariffs on imported goods. There are import and excise

duties but no value-added tax. The average applied most favoured nation (MFN) applied tariff

is around 1.7 percent, with no tariffs on agriculture and 2 percent on non-agricultural products.

Tariff rates range up to 30 percent, with chemicals and related products subject to the highest

tariff protection.

As tariffs are low, non-tariff measures (NTMs) have become the focus in Brunei.

According to a study conducted by Ando and Obashi (2010) NTMs have been implemented on

some products in Brunei. All tariff lines for chemicals and related products are subject to

automatic licensing measures, 70 percent of which are also subject to non-automatic

licensing simultaneously. More than 95 percent of animals, plants, and food products group

are subject to technical regulations. All machineries products are subject to either quantity

control or automatic licensing. Nearly 90 percent of wood and wood products are subject to a

combination of automatic licensing and quantity control measures. A study conducted by Ando

and Obashi (2010) uses 2008 UNCTAD classifications.

Chapter 3

39

As NTM numbers and types have evolved, UNCTAD developed a new and more

comprehensive NTM classification in 2012. This study uses the 2012 UNCTAD classification in

classifying and analysing NTM applied in Brunei.

2. Legal comprehensiveness

Brunei applies a number of non-tariff measures (NTMs) in its international trade. These

NTMs are spread across several types of legal documents issued by government agencies in

Brunei. Most of these documents can be accessed through a centralised source, namely the

website of the Attorney General’s Chamber (www.agc.gov.bn). The website publishes all legal

documents issued in Brunei, including all regulations related to international trade. In some

cases, NTM regulations can also be found in other online sources, such as ministries’ websites,

departments’ websites, and in World Trade Organization (WTO) notifications.

One hundred regulations with indications of NTMs were found during the collection and

review process. However, only 58 regulations were found to contain NTMs. Most of these

regulations are written in English, with only two in Malay. Most NTMs are found in rules and

regulations, while a few are found in acts. The rules and regulations generally provide more

detailed information of the measures and the affected products than the acts.

In order to validate legal comprehensiveness, six international conventions relating to

international trade were reviewed. Four international conventions have been ratified into

regulations in Brunei:

1) Montreal Protocol, ratified in the Customs (Prohibition and Restriction on Import and

Export) Order, 2005

2) Basel Convention, ratified in the Hazardous Waste (Control of Export, Import and

Transit) Order, 2013

3) CITES Convention, ratified in the Wild Fauna and Flora Order, 2007

4) Single Convention on Narcotic Drugs, the Convention on Psychotropic Substances; the

Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances: ratified

in the Misuse of Drugs Act, 1978

Two international conventions are not yet ratified, namely the Stockholm Convention

and the Chemical Weapons Convention.

Table 3.1 shows the comprehensiveness of Brunei’s NTMs. There are 58 NTM

regulations containing NTMs, but only two that have been notified to the WTO – the Public

Health (Food) Regulations and the Halal Meat Rules. A total of 29 government institutions issue


40

NTM regulations. The total number of coded NTMs is 516, affecting 5,613 products (Harmonized

System [HS] code), or 56.6 percent of the total products traded in Brunei.

Table 3.1. Comprehensiveness of Non-tariff Measures in Brunei Darussalam

Source: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data

3. Issuing institutions

The Ministry of Health issued more than half of the NTM regulations (57.5 percent),

followed by the Ministry of Industry and Primary Resources (8.6 percent), and the Department

of Agriculture and Agrifood (6.6 percent) (Table 3.2). There are 168 NTMs issued jointly by more

than one institution.

Number Comprehensiveness Number

1 Total number of coded regulations 58

2 Total number of coded regulations reported to the WTO 2

3 Total number of coded NTMs 516

4 Total affected products (HS lines, national tariff lines)

a. Total number of affected products a/ 5,613 b. Share of the number of affected products to the number of total products (%) b/

56.6%

5 Total number of issuing institutions 29 Notes: a/ One product may be affected by more than one measure, but the same HS-coded product will be counted as one product, e.g., HS 840731 has three NTMs, so it is counted as ‘one affected product’. b/ Brunei adopts the HS-10 digit at national tariff lines and it has 9,916 tariff lines. Among these 9,916 products, 5,613 products are affected by NTMs, so the share of the affected products to the number of total products is 56.6 percent.

Chapter 3

41

Table 3.2. Proportion of Non-tariff Measures by Issuing Institution (Single Institutions)

Number Issuing Institution Number of NTMs

Total Number of NTMs (%)

1 Ministry of Health 393 57.5

2 Ministry of Industry and Primary Resources 59 8.6

3 Department of Agriculture and Agrifood 45 6.6

4 Ministry of Religious Affairs 26 3.8

5 Royal Customs and Excise Department 25 3.7

6 Ministry of Finance 18 2.6

7 Department of Forestry 16 2.3

8 Authority for Info-communications Technology Industry 11 1.6

9 Ministry of Communication 10 1.5

10 Department of Land Transport 9 1.3

11 Other institutions 72 10.5

Total 684* 100 Note: Total number of NTMs is 516, of which 168 were jointly issued by institutions. Source: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data

Table 3.3. Proportion of Non-tariff Measures by Issuing Institution (Single and Joint Institutions)




2 Ministry of Health, Ministry of Religious Affairs, Department of Agriculture and Agrifood, Ministry of Industry and Primary Resources

23 4.5

3 Department of Agriculture and Agrifood 17 3.3

4 Department of Forestry, Ministry of Industry and Primary Resources

16 3.1

5 Authority for Info-communications Technology Industry 9 1.7

6 Fisheries Department, Ministry of Industry and Primary Resources

9 1.7

7 Ministry of Health and Royal Customs and Excise Department, Ministry of Finance

9 1.7

8 Royal Brunei Police Force 9 1.7

9 Ministry of Health, Ministry of Home Affairs 7 1.4

10 Brunei Museums Department 6 1.2

11 Other institutions 57 11

Total 516 100


As shown in Table 3.3, out of the top 10 institutions, 3.4 percent of NTMs were jointly

issued by the Ministry of Health, the Ministry of Religious Affairs, the Department of Agriculture

and Agrifood, the Ministry of Industry and Primary Resources, while 1.3 percent were jointly


42

issued by the Ministry of Health and the Royal Customs and Excise Department, and 1.0 percent

were jointly issued by the Ministry of Health and the Ministry of Home Affairs.

4. NTM classification by type

As shown in Table 3.4, the most commonly identified types of NTMs are technical

barriers to trade (TBT) (Type B), sanitary and phytosanitary (SPS) measures (Type A), and price

control measures (Type F). TBT measures accounted for 55.8 percent of total NTMs.

Table 3.4. Non-tariff Measure Classification by Type

Code NTM by Type Number of NTMs %

A Sanitary and phytosanitary (SPS) measures 161 31.2

B Technical barriers to trade (TBT) 288 55.8

C Pre-shipment inspection and other formalities 1 0.2

D Contingent trade protective measures 0 0.0

E

Non-automatic licensing, quotas, prohibitions, and quantity control measures other than SPS or TBT reasons 2 0.4

F Price control measures including additional taxes and charges 18 3.5

G Finance measures 0 0.0

H Measures affecting competition 0 0.0

I Trade-related investment measures 0 0.0

J Distribution restrictions 0 0.0

K Restriction on post-sales services 0 0.0

L Subsidies (excluding export subsidies under P7) 0 0.0

M Government procurement restrictions 0 0.0

N Intellectual property 0 0.0

O Rules of origin 0 0.0

P Export-related measures 46 8.9

Total coded NTMs 516 100 Source: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data

Figure 3.1 shows that 70 percent of the TBT measures originated from public health

(food) regulations, while regulations concerning poisonous products, drugs, medicine, cement,

and halal meat each contributed around 2 percent to TBT measures. Out of 288 TBT measures,

44 percent were B7 (product quality), followed by B31 (labelling requirements) and B6 (product

identity). B7 (product quality) was mostly applied to food products.

Chapter 3

43

Figure 3.1. Technical Barriers to Trade Measures by Regulation


SPS measures were the second-largest group of NTMs, accounting for 31.2 percent of

total NTMs. As shown in Figure 3.2, 84 percent of SPS measures concerned public health (food).

Other significant sources were quarantine regulations, wholesome food orders, and guidelines

to apply for import permits for mineral water. The objective of most SPS measures is the

protection of human health.

Out of 161 SPS NTMs, the most frequently applied NTM was A22 (restricted use of

certain substances in foods and feeds), which accounted for 47 percent, followed by A31

(labelling requirements) accounted for 20 percent, A21 (tolerance limit of residues or

contaminations) accounted for 6 percent, and A64 (storage and transport conditions) accounted

for 6 percent.

2%

2%

2%

2%

2%

70%

20%

Guidelines to Apply Permit to Import Cement

Halal Meat Act

Medicines (Licensing, Standard and Fees) Regulations

Misuse of Drugs Act

Poison Act

Public Health (Food) Regulations

Other Regulations


44

Figure 3.2. Sanitary and Phytosanitary Measures by Regulation


Overall, NTM Types A, B, and C (so-called technical measures) were the most commonly

applied NTMs in Brunei, accounting for 87.2 percent of total NTMs. Meanwhile, non-technical

measures accounted for 19.7 percent of total NTMs. The non-technical measures most applied

in Brunei were Type E (non-automatic licensing, quotas, prohibitions, and quantity control

measures other than for SPS or TBT reasons) and Type F (price control measures including

additional taxes and charges). NTM Type F mostly affected food products, motor vehicles and

trailers, and endangered species.

Meanwhile, export measures covered 8.9 percent of total NTMs. Products most affected

by export measures were those regulated by international conventions, such as hazardous

waste, wild flora and fauna, and arms and explosives. Export measures were also imposed on

animal products, oil and mining, and products exported through government incentive schemes.

If NTM types are broken down into a more detailed code or into sub-chapters of

classifications, 53 types of NTMs were applied in Brunei (Table 3.5). Among these, B7 was the

most frequently applied NTM, accounting for 24.4 percent, followed by A22 (14.5 percent), and

B31 (8.9 percent). Most of the B7 NTMs were applied to foodstuffs.

2%

1%

1%

3%

1%

84%

6%

3%

Agricultural Pests and Noxious Plants Act

Customs Order 2006

Fisheries Order 2009

Guidelines to apply import permit of mineral water

Halal Meat Act

Public Health (Food) Regulations

Quarantine and Prevention of Disease (Animals) Act

Wholesome Meat Order 2011

Chapter 3

45

Table 3.5. Non-tariff Measure Classification by Detailed Type of NTM

Number Sub-

Chapter of NTM

Amount % Number Sub-

Chapter of NTM

Amount %

1 A14 5 0.97 28 B6 37 7.17

2 A15 3 0.58 29 B7 126 24.42

3 A19 2 0.39 30 B81 2 0.39

4 A21 10 1.94 31 B82 4 0.78

5 A22 75 14.53 32 B83 6 1.16

6 A31 32 6.20 33 B84 8 1.55

7 A33 1 0.19 34 B85 10 1.94

8 A41 3 0.58 35 B9 2 0.39

9 A42 1 0.19 36 C3 1 0.19

10 A51 2 0.39 37 E113 1 0.19

11 A63 2 0.39 38 E321 1 0.19

12 A64 10 1.94 39 F11 1 0.19

13 A81 1 0.19 40 F19 1 0.19

14 A82 1 0.19 41 F65 6 1.16

15 A83 7 1.36 42 F69 9 1.74

16 A84 4 0.78 43 F72 1 0.19

17 A85 1 0.19 44 P11 2 0.39

18 A86 1 0.19 45 P13 17 3.29

19 B11 6 1.16 46 P14 2 0.39

20 B14 22 4.26 47 P21 1 0.19

21 B15 6 1.16 48 P5 8 1.55

22 B21 1 0.19 49 P61 6 1.16

23 B22 5 0.97 50 P62 4 0.78

24 B31 46 8.91 51 P69 4 0.78

25 B33 3 0.58 52 P7 1 0.19

26 B41 1 0.19 53 P9 1 0.19

27 B42 3 0.58 TOTAL 516 100 Source: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data

As shown in Table 3.6, among the top 10 NTMs, nine were SPS and TBT, and only one

was an export measure, which licences or governs permits required for export (P13). Out of 126

Type B7 NTMs, only one NTM did not relate to food regulations. This NTM comes from a

regulation concerning the quality of imported used cars.


46

Table 3.6. Top 10 Non-tariff Measure Codes

Number NTM by Type Amount %

1 B7 126 24.4

2 A22 75 14.5

3 B31 46 8.9

4 B6 37 7.2

5 A31 32 6.2

6 B14 22 4.3

7 P13 17 3.3

8 A21 10 1.9

9 A64 10 1.9

10 B85 10 1.9 11 Others 131 25.4


5. NTM classification by affected product

Furthermore, to identify the intensity of NTMs on products, this study classifies the

number of NTMs applied. The results are shown in Tables 3.7 and 3.8 and Figure 3.3. Products

that were most affected (by at least three NTMs) were in transportation (11.8 percent),

vegetable products (11.1 percent), animals and animal products (8.9 percent), and foodstuffs

(7.4 percent). Most machinery products were affected by two NTMs (28.5 percent), while

plastics/rubber products were mostly affected by just one NTM.

NTMs affecting transportation products consisted of product registration, company registration,

certification, documentation requirements, licensing, inspection, product quality, import licence

fees, additional charges, and excise tax. The objective of the measures on transportation

products is mostly to ensure public safety related to transportation.

Although the transportation products group was the most affected by three or more

NTMs, on average the animals and animal-product group had the highest average number of

NTMs. As shown in Figure 3.4, on average this product group was affected by 19.8 NTMs, while

the transportation product group was affected by 11.8 NTMs. Other product groups that had

high average NTMs were vegetable products (11.4), foodstuffs (10.2), and wood and wood

products (9.2). The plastics/rubber product group had the lowest average number of NTMs, at

only 1.2.

Overall, NTMs were applied intensively on affected products in Brunei. As shown in

Table 3.8, 56.48 percent of affected products were affected by at least three NTMs, while 37.2

percent of affected products were affected by two NTMs, and only 6.3 percent of affected

products were affected by just one NTM.

Chapter 3

47

Table 3.7. Non-tariff Measure Classification by Affected Product

HS Code Product Group 1 NTM 2 NTMs 3 NTMs or more

01-05 Animals & animal products 1 18 498

06-15 Vegetable products 0 3 623

16-24 Foodstuffs 0 25 414

25-27 Mineral products 15 112 29

28-38 Chemicals & allied industries 38 99 332

39-40 Plastics/rubber 165 0 7

41-43 Raw hides, skins, leather & furs 0 1 59

44-49 Wood & wood products 26 29 131

50-63 Textiles 30 25 106

64-67 Footwear/headgear 0 0 27

68-71 Stone/glass 26 41 17

72-83 Metals 18 38 22

84-85 Machinery/electrical 5 1,600 147

86-89 Transportation 19 39 662

90-99 Miscellaneous 9 61 96

Total 352 2,091 3,170 Source: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data

Table 3.8. Non-tariff Measure Classification by Affected Product (%)


01-05 Animals & animal products 0.02 0.32 8.87

06-15 Vegetable products 0.00 0.05 11.10

16-24 Foodstuffs 0.00 0.45 7.38

25-27 Mineral products 0.27 2.00 0.52

28-38 Chemicals 0.68 1.76 5.91

39-40 Plastics/rubber 2.94 0.00 0.12

41-43 Hides and skins 0.00 0.02 1.05

44-49 Wood products 0.46 0.52 2.33

50-63 Textiles 0.53 0.45 1.89

64-67 Footwear 0.00 0.00 0.48

68-71 Stone/glass 0.46 0.73 0.30

72-83 Metals 0.32 0.68 0.39

84-85 Machinery 0.09 28.51 2.62

86-89 Transportation 0.34 0.69 11.79

90-99 Miscellaneous 0.16 1.09 1.71

Total 6.27 37.25 56.48 Source: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data


48

Figure 3.3. Non-tariff Measure Classification by Affected Product


Figure 3.4. Average Number of Non-tariff Measures by Product Group


19.8

11.4

10.2

2.5

7.8

1.2

8.0

9.2

5.8

8.0

2.6

3.1

2.5

11.8

4.8

Animal & Animal Products

Vegetable Products

Foodstuffs

Mineral Products

Chemicals & Allied Industries

Plastics / Rubbers

Raw Hides, Skins, Leather, & Furs

Wood & Wood Products

Textiles

Footwear / Headgear

Stone / Glass

Metals

Machinery / Electrical

Transportation

Miscellaneous

Chapter 3

49

6. Main findings

From 58 regulations, 516 NTMs affect 5,613 products (HS codes).

The Ministry of Health issued the most NTM regulations.

Technical measures were the most frequently applied NTMs in Brunei, accounting for

87.2 percent of total NTMs. From these numbers, TBT measures covered 55.8

percent of total NTMs and SPS measures accounted for 31.2 percent of total NTMs.

Product quality (B7) was the most frequent NTM. This measure mostly applies to food

products.

Export measures covered 8.9 percent of the total. The most frequently affected

products by export measures were those products regulated by international

conventions.

Products that were most affected by three or more NTMs were transportation,

vegetable products, animals and animal products, and foodstuffs.

On average, the animals and animal product group was the group most frequently

affected by NTMs.

7. Policy recommendations

In order to increase NTM transparency, the government should increase the number

of notifications to the WTO. Currently, only two regulations (out of 58) have been

notified to the WTO.

Further study is needed to understand whether the intensive use of NTMs on several

products tends to lower or to increase trade volumes in Brunei Darussalam.

References

Ando, M. and A. Obashi (2010), ‘The Pervasiveness of Non-tariff Measures in ASEAN – Evidence from the Inventory Approach’, in M. Mikic (ed.), Rising Non-Tariff Protectionism and Crisis Recovery, Bangkok: Studies in Trade and Investment, United Nations Economic and Social Commision for Asia and the Pasific (ESCAP), October, 27–55.

Brunei Economic Development Board website. Available at: http://www.bedb.com.bn

Lawrey, R. N. (2010), ‘An Economist’s Perspective on Economic Diversification in Brunei Darussalam’, CSPS Strategy and Policy Journal, 1, pp.13–28.

Organisation for Economic Co-operation and Development (OECD) (2014), Economic Outlook for Southeast Asia, China and India 2014: Beyond the Middle-Income Trap, http://dx.doi.org/10.1787/saeo-2014-en

World Trade Organization (WTO) (2015), Trade Policy Review Brunei Darussalam 2014. Geneva: World Trade Organization.

http://www.bedb.com.bn/

http://dx.doi.org/10.1787/saeo-2014-en

Chapter 4

Classification of Non-tariff Measures in Cambodia

Chap Sotharith Cambodian Institute for Cooperation and Peace C. Ruth Elisabeth L. Tobing Center for Inclusive and Sustainable Development Prasetiya Mulya Business School Anika Widiana Center for Inclusive and Sustainable Development Prasetiya Mulya Business School

April 2016

This chapter should be cited as

Sotharith, C., C.R.E.L. Tobing and A. Widiana (2016), ‘Classification of Non-tariff Measures in Cambodia’, in Ing, L.Y., S. F. de Cordoba and. O. Cadot (eds.), Non-Tariff Measures in ASEAN. ERIA Research Project Report 2015-1, Jakarta: ERIA, pp.51-63.

51

CHAPTER 4

Classification of Non-tariff Measures in Cambodia

Chap Sotharith Cambodian Institute for Cooperation and Peace

Phnom Penh, Cambodia

C. Ruth Elisabeth L. Tobing Center for Inclusive and Sustainable Development

Prasetiya Mulya Business School, Jakarta, Indonesia

Anika Widiana Center for Inclusive and Sustainable Development

Prasetiya Mulya Business School, Jakarta, Indonesia

1. Overview of Cambodia

Cambodia has achieved national reconciliation and political stability after the first

democratic election in 1993 resulted in forming a new coalition government. After overcoming

hardship including a protracted civil war, political strife, genocide, and international isolation,

the country has transformed from a centrally planned economy to a free market economy with

the main tasks to implement macroeconomic and structural reforms and to alleviate poverty.

As a result, Cambodia has achieved significant success in stabilizing the macroeconomic

foundation with rapid economic growth and low inflation.

In line with peace, political stability, and social order, Cambodia can maintain a stable

economic growth with an average of about 7 percent per year as planned in its National

Strategic Development Plan. The highest record of growth was 12.3 percent in 2005 and the

lowest record of growth was 0.1 percent in 2009 due to the global financial crisis.

It is estimated in 2015 that the growth rate reached 6.9 percent, the gross domestic

product (GDP) reached $18,502 million, and the per capita GDP reached $1,228. The sectoral

growth is 1 percent for agriculture, 8.7 percent for industry, and 9.0 percent for services

(Ministry of Economy and Finance). The leading sectors in Cambodia are garment, agriculture,

tourism, and construction. The poverty rate has been reduced about 1 percent per year.

Currently, trade is an important instrument for economic development and poverty

reduction in Cambodia. In order to implement the World Trade Organization (WTO) and the


52

Association of Southeast Asian Nations (ASEAN) trade agreements, Cambodia has conducted

many reforms, especially legal and institutional reforms and trade facilitation. In reforming its

tariff structure, Cambodia had reduced the number of tariff bands from 12 to 4 before joining

the WTO, and the highest tariff rates of 40 percent, 50 percent, 90 percent, and 120 percent

were abolished. At present, the tariff comprises four tiers: 0 percent, 7 percent, 15 percent,

and 35 percent.

While the trade balance of Cambodia is in deficit, both exports and imports have been

expanding as a result of economic growth. As of 31 July 2015, the value of exports was about

$5.35 billion, which is an increase of more than 20.5 percent compared to the same period of

2014, while the value of imports reached a record of $6.70 billion marking an increase of 17.2

percent compared to 2014 in the same period.

The major destination countries of exports are the United States, Hong Kong, China,

the European Union, Canada, and Viet Nam. The major importing countries are Hong Kong,

China, Taiwan, Thailand, and Viet Nam. The primary export product is apparel, which

accounted for more than 80 percent of the total exports. The major import products are

textiles, petroleum products, and vehicles. Cambodia is significantly depending on the imports

for industrial input products and daily commodities. Certainly, with the integration of ASEAN

and the liberalization of international trade, non-tariff measures (NTMs) are an important

component in a country's trade activity.

2. Hierarchy of laws and regulations

Cambodia’s Constitutional Assembly adopted the Constitution on 21 September 1993.

It is the supreme law of the Kingdom of Cambodia and organizes Cambodia’s government and

institutions. All laws and regulations derive from the Constitution’s provisions and must

conform to it (Open Development Cambodia website). The Constitution addresses questions

of sovereignty, the role and status of the king, the fundamental rights of the Khmer citizens,

the economy, education, culture, and social affairs, the functioning of the National Assembly,

the Senate, congress and the government, and the functioning of the judiciary, the

Constitutional Council, and the administration.

Laws and regulations are classified in order of importance. There are numerous legal

norms adopted by the legislative and executive powers: the Constitution, laws, decrees,

decisions, among others. There is a strict hierarchy between them, so that each norm of a

lower level must conform to those of a higher value.

Chapter 4

53

- Constitution: The supreme law of the Kingdom of Cambodia.

- International treaties: The king signs and ratifies international treaties and conventions after

their approval by the National Assembly and the Senate. After such ratification, international

treaties and conventions become laws and may be used as the basis for judicial decisions

(Article 26 of the Constitution).

- Chbab/law: Laws adopted by the National Assembly.

- Kram and kret (royal kram and royal decree): Decrees issued under the name of the king in

execution of his constitutional powers.

- Anukret/sub-decrees are signed by the prime minister after adoption at a cabinet meeting.

In case the cabinet meeting has not adopted the sub-decree, countersignature by the

minister(s) in charge is required. The prime minister can use this in execution of his own

regulatory powers.

- Prakas/proclamations are issued by members of the government in execution of their own

regulatory powers.

- Sechdei samrech/decision: Individual decision(s) made by the prime minister, minister, or

governor (prakas-deika), which are made in execution of his own regulatory powers.

- Sarachor/circular: Issued by the prime minister as the head of government, and by a minister

as an official of the relevant ministry either to explain or clarify legal regulatory measures or

to provide instructions.

- Deka/provincial ordinance: Orders issued by a governor within the territorial limits of his

province.

3. Approach to obtain legal comprehensiveness

To analyse NTMs in Cambodia, 100 percent legal comprehensiveness is of prime

importance. Thus we obtain comprehensive data as well as detailed and complete analysis. To

achieve 100 percent legal comprehensiveness, we took several approaches in collecting

regulations.

First, we needed to find out official sources of Cambodia, for example searching for

regulations in each of the issuing institution (ministry).

Second, through Cambodia's National Trade Repository website we obtained the laws,

anukret, and prakas relating to trade. As a member state of ASEAN, Cambodia is committed to

the development of a National Trade Repository, which is integrated with the ASEAN Trade

Repository (atr.asean.org). The National Trade Repository website (http://cambodiantr.gov.kh)

http://atr.asean.org/

http://cambodiantr.gov.kh/


54

is the official source for all regulatory information relevant to traders who wish to import

goods into Cambodia or export to other countries.

Third, we also checked the WTO notifications to complete the comprehensiveness of

data. In fact, since 2010, Cambodia only notified three regulations relating to food standards

and labelling.

The comprehensiveness of Cambodia’s NTMs is shown in Table 4.1. There are 52

regulations containing NTMs, but only three that have been notified to the WTO: the Law on

Bio-Safety & Protected Areas, Anukret No. 42 on Industrial Standards of Cambodia, and the

Law on the Management of Quality and Safety of Products and Service. The total number of

coded NTMs is 243, affecting 9,558 products (Harmonized System [HS] code), or 100 percent

of the total products traded in Cambodia.

Table 4.1. Comprehensiveness of Non-tariff Measures in Cambodia



2 Total number of coded regulations reported to the WTO 3



Total number of affected products a/. 9,558

Share of the number of affected products to the number of total products (%)b/. 100%

5 Total number of issuing institutions 14 Notes: a/. One product may be affected by more than one measure, but the same HS-coded product will be counted as one product, e.g., HS 840731 has three NTMs, so it is it will be counted as one affected product. b/. Cambodia adopts the HS-8 digit code at national tariff lines and it has 9,558 tariff lines. All 9,558 products are affected by NTMs, so the share of the affected products to the number of total products is 100 percent. Source: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data.

4. Issuing institutions

As shown in Table 4.2, 49 percent of the NTM regulations were issued by the Ministry

of Agriculture, Forestry and Fishery, followed by the Ministry of Health (13 percent), and the

Ministry of Industry, Mines and Energy (10 percent). There are 114 NTMs issued jointly by

more than one institution. Table 4.3 shows the NTM regulations issued by single and joint

institutions.

Chapter 4

55

Table 4.2. Proportion of Non-tariff Measures by Issuing Institution (Single Institution)



(%)

1 Ministry of Agriculture, Forestry and Fishery 174 49

2 Ministry of Health 46 13

3 Ministry of Industry, Mines and Energy 34 10

4 Ministry of Economic and Finance 23 6

5 Ministry of Industry and Handicraft 21 6

6 Ministry of Interior 12 3

7 Ministry of Commerce 11 3

8 Ministry of Environment 11 3

9 National Steering Committee for Biosafety 7 2

10 National Bank of Cambodia 5 1


Total 357* 100 Note: * There are 114 NTMs issued by joint institutions. Source: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data

Table 4.3. Proportion of Non-tariff Measures by Issuing Institution (Single and Joint Institution)



(%)

1 Ministry of Agriculture, Forestry and Fisheries 74 30

2 Ministry of Industry, Mines and Energy 34 14


4 Ministry of Industry and Handicraft 21 9

5 Ministry of Health, Ministry of Agriculture, Forestry, Hunting and Fishing,

17 7

6 Ministry of Economy and Finance 11 5

7 Ministry of Agriculture, Forestry and Fishery, Ministry of Economic and Finance

9 4


9 Ministry of Interior 8 3

10 National Steering Committee for Biosafety, Ministry of Environment

7 3


Total 243 100



56

5. Non-tariff measure classification by type

The most commonly identified type of NTMs are technical barriers to trade (TBT) (Type

B), export-related measures (Type P), and sanitary and phytosanitary (SPS) measures (Type A)

(Table 4.4). TBT measures accounted for 49.8 percent of total NTMs.

Figure 4.1 show that 12 percent of the TBT measures originated from Anukret No.69

on the Standards and Management of Agricultural Materials Regulations, 9 percent originated

from the Law on Management of Pesticides and Fertilizer 2012, and 6 percent originated from

Anukret No. 48 on Formalities and Conditions for Strong Acid Control. Meanwhile, regulations

concerning chemical products, forestry, and medicine each contributed around 5 percent to

TBT measures. Out of 121 TBT measures, 25 percent were B15, followed by B31 (15 percent).

Table 4.4. Non-tariff Measure Classification by Type






E Non-automatic licensing, quotas, prohibitions, and quantity control measures other than SPS or TBT reasons 3 1.2




I Trade-related investment measures 0 0.0


K Restriction on post-sales services 0 0.0

L Subsidies (excluding export subsidies under P7) 0 0.0

M Government procurement restrictions 0 0.0

N Intellectual property 0 0.0

O Rules of origin 0 0.0



SPS measures were the third largest group of NTMs, accounting for 14.8 percent of

total NTMs. As shown in Figure 4.2, around 45 percent of SPS measures were concerned with

sanitation of animals and animal products. Those NTMs originated from three regulations:

Chapter 4

57

Anukret No. 16 on Sanitary Inspection of Animals and Animal Products, Prakas No. 178 on

Procedure of Animal Sanitation Control and Animal Origin Products, and Anukret No. 014 on

the Inspection of Animal Sanitary and Animal Originated Products. Other significant sources

were regulations on vinegar, chilli sauce, and phytosanitary inspection.

Out of 36 SPS NTMs, the most frequently applied NTM was A83 (certification

requirement), which accounted for 17 percent, followed by A31 (11 percent), A82 (11 percent)

and A84 (11 percent).

Figure 4.1. Technical Barriers to Trade Measures by Regulation


Figure 4.2. Sanitary and Phytosanitary Measures by Regulation

chilli

'Vinegar'



58

Overall, NTM Types A, B, and C (so-called technical measures) were the most

commonly applied NTMs in Cambodia, accounting for 65 percent of total NTMs. Non-technical

measures accounted for 6.2 percent of total NTMs. The non-technical measures most applied

in Cambodia were Type F (price control measures including additional taxes and charges)

accounting for 4.90 percent of total NTMs. Even though Type E (non-automatic licensing,

quotas, prohibitions, and quantity control measures other than SPS or TBT reasons) only

accounted 1.2 percent of total NTM, this type of NTM affected 31.3 percent of total products.

Meanwhile, export measures is the second largest type of NTM, covering 28.8 percent

of total NTMs and 31.3 percent of total affected products. Export measures are imposed on all

exported goods in Cambodia.

Based on the sub-chapter classification, 49 types of NTMs were applied in Cambodia

(Table 4.5). Among these, B14 (authorization requirement for TBT reasons) was the most

frequently applied NTM in Cambodia, accounting for 12 percent, followed by P13 (8 percent)

and B31 (7 percent).

Chapter 4

59

Table 4.5. NTM Classification by Sub-Chapter

Number NTM Type Number of NTMs

% Number NTM Type

Number of NTMs

%

1 A14 3 1 26 B82 8 3

2 A15 1 0 27 B83 8 3

3 A19 1 0 28 B84 8 3

4 A22 2 1 29 B85 7 3

5 A31 4 2 30 B853 2 1

6 A32 2 1 31 C3 1 0

7 A33 3 1 32 E111 1 0

8 A42 1 0 33 E23 1 0

9 A64 1 0 34 E231 1 0

10 A82 4 2 35 F6 1 0

11 A83 6 2 36 F61 4 2

12 A84 4 2 37 F65 3 1

13 A85 1 0 38 F69 3 1

14 A851 1 0 39 F71 1 0

15 A86 2 1 40 P11 2 1

16 B11 3 1 41 P12 1 0

17 B14 30 12 42 P13 20 8

18 B15 6 2 43 P14 9 4

19 B22 2 1 44 P5 10 4

20 B31 18 7 45 P61 10 4

21 B32 6 2 46 P62 8 3

22 B33 6 2 47 P69 8 3

23 B42 4 2 48 P7 1 0

24 B7 6 2 49 P9 1 0

25 B81 7 3 Total 243 100 Source: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data


60

As shown in Table 4.6, among the top 10 NTMs, five were TBT and another five were

export-related measures.

Table 4.6. Top 10 Non-tariff Measure Codes

Number NTM Type Number of NTMs %

1 B14 30 12

2 P13 20 8

3 B31 18 7

4 P5 10 4

5 P61 10 4

6 P14 9 4

7 B82 8 3

8 B83 8 3

9 B84 8 3

10 P62 8 3

Others 114 47 Source: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data

6. Non-tariff measure classification by affected product

Furthermore, to identify the intensity of NTMs on products, we classified the number

of NTMs applied. The results are shown in Tables 4.7 and 4.8 and Figure 4.3. From those tables

and figure we found that all products traded in Cambodia were affected by at least three

NTMs.

The groups of products mostly affected by NTMs are machinery (21.6 percent),

chemicals (12.1 percent), textiles (11.3 percent) and metals (9.5 percent). More than half of

NTMs (54.5 percent) were imposed on those products groups. Textile products (apparel) are

the primary export product of Cambodia.

Meanwhile, NTMs imposed on vegetable and animal products and foodstuff is below 7

percent, 6.6 percent imposed on vegetable products, 5.5 percent imposed on animal products,

and 4.6 percent imposed on foodstuff. Most NTMs imposed on those products are SPS, TBT,

and export-related measures.

Chapter 4

61

Table 4.7. Non-tariff Measure Classification by Affected Product


01-05 Animal & animal products 0 0 521

06-15 Vegetable products 0 0 630


25-27 Mineral products 0 0 204

28-38 Chemicals & allied industries 0 0 1,157

39-40 Plastics/rubbers 0 0 480

41-43 Raw hides, skins, leather, & furs 0 0 100

44-49 Wood & wood products 0 0 426

50-63 Textiles 0 0 1,079

64-67 Footwear/headgear 0 0 74

68-71 Stone/glass 0 0 296

72-83 Metals 0 0 909

84-85 Machinery/electrical 0 0 2,067



Total 0 0 9,558


Table 4.8. Non-tariff Measure Classification by Affected Product (%)


01-05 Animal products 0.0 0.0 5.5

06-15 Vegetable products 0.0 0.0 6.6

16-24 Foodstuffs 0.0 0.0 4.6

25-27 Mineral products 0.0 0.0 2.1

28-38 Chemicals 0.0 0.0 12.1

39-40 Plastics/rubbers 0.0 0.0 5.0

41-43 Hides and skins 0.0 0.0 1.0

44-49 Wood products 0.0 0.0 4.5

50-63 Textiles 0.0 0.0 11.3

64-67 Footwear 0.0 0.0 0.8

68-71 Stone/glass 0.0 0.0 3.1

72-83 Metals 0.0 0.0 9.5

84-85 Machinery 0.0 0.0 21.6

86-89 Transportation 0.0 0.0 5.9

90-99 Miscellaneous 0.0 0.0 6.4

Total 0.0 0.0 100 Source: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data


62

Figure 4.3. Non-tariff Measure Classification by Affected Product


7. Main findings

From 52 regulations, 243 NTMs affect 9,558 products (HS codes). This is 100

percent of the total products traded in Cambodia.

Most NTM regulations are issued by the Ministry of Agriculture, Forestry and

Fishery.

Technical measures are the most frequently applied NTMs in Cambodia, accounting

for 65 percent of total NTMs. From these numbers, TBT measures accounted for

49.8 percent of total NTMs.

Authorization requirement for TBT reasons (B14) is the most frequent NTM.

Export-related measures covered 28.8 percent of total NTMs and affected all

product traded in Cambodia.

Products that were most affected by three or more NTMs were machinery (21.6

percent), chemicals (12.1 percent), textiles (11.3 percent), and metals (9.5 percent).

8. Policy recommendations

The NTM database in the Cambodia Trade Repository should be reviewed and

updated every year. There are many regulations in English that are not updated. All

Chapter 4

63

legal documents including laws, anukrets, and prakas should be translated into

English by relevant ministries and establishments.

Official websites of all government ministries and establishments are only in the

Khmer language and are often outdated. The ministry whose published regulation is

related to NTMs should update the website regularly and add English pages.

In the process of making laws or regulations related to NTMs, representatives from

relevant stakeholders, especially the NTMs National Committee and the relevant

private sector, should be invited to participate and provide input.

Capacity building should be supported for government officials at the secretariat of

the NTMs National Committee.

Awareness of NTMs and changes in laws and regulations should be disseminated

through press releases and announcements in official websites of relevant

ministries.

Relevant agencies should regularly monitor regulations that might affect NTM

changes while some regulations may be amended or nullified the old NTMs.

References

Ministry of Economy and Finance website. Available at: http://www.mef.gov.kh/ (accessed 10 January 2016).

Open Development Cambodia website. Available at: http://www.opendevelopmentcambodia.net/laws-regulations/.

http://www.mef.gov.kh/

http://www.opendevelopmentcambodia.net/laws-regulations/

65

CHAPTER 5

Indonesia’s Non-tariff Measures: An Overview10

Ernawati Munadi

Wijaya Kusuma University, Surabaya, Indonesia

1. Background

The reduction in tariff rates as a result of multilateral trade negotiations has encouraged

the use of non-tariff measures (NTMs) to control the flow of international trade, including in

Indonesia. In some countries, mostly in developed countries, the increasing number of reasons

for using NTMs reflects the move away from a focus on the production side of the equation

towards the defence of consumer and societal interests (WTO, 2012).

In spite of their growing importance in regulating trade, the exact impact of NTMs on

trade flows is not well understood, and the paucity of data on NTMs is possibly the major

constraint to undertaking a qualitative analysis of their impact (UNCTAD, 2013). Unlike tariffs,

information on NTMs is not merely numbers; the relevant information is often hidden in legal

and regulatory documents. Therefore, collecting data on NTMs is a matter of collecting

information hidden in those regulations.

The difficulty of collecting data on NTMs is also due to the fact that these documents

are generally not centralised but often reside in different regulatory agencies. For example,

Indonesia’s LARTAS database reveals that 13 different government agencies are tasked to issue

regulations on import permits. Although the Ministry of Trade (MoT) is responsible for issuing

most of these, it accounted for only 58 percent on average of the total NTMs issued between

2009 and 2014.11 Meanwhile, other agencies, such as Quarantine and the Badan Pengawas Obat

dan Makanan (BPOM or the National Drug and Food Control Agency), were responsible on

average for 18 percent and 17 percent of NTMs, respectively. Together, the MoT, the BPOM,

and Quarantine cover 93 percent of total Indonesian import NTMs. Other ministries are also

active in issuing NTMs, such as the Ministry of Health and Ministry of Agriculture but in limited

10 The author is grateful to Indah Rahayu and Zamroni Salim. Special thanks are also given to Ayu Sinta Saputri from the Ministry of Trade of Indonesia, Lili Yan Ing from the Economic Research Institute for ASEAN and East Asia (ERIA), and the UNCTAD team for their comments during the data compilation. Project funding from ERIA is gratefully acknowledged. 11 On average, the total number of NTMs in the 10-digit Harmonized System (HS) code is 9,289.


66

numbers. There is an urgent need to develop a better understanding and transparency of

existing NTMs.

Nicita and Gourdon (2013) mentioned that efforts to collect NTM data started in the

late 1990s when the United Nations Conference on Trade and Development (UNCTAD) started

to collect and categorise NTM data, and this is available in the Trade Analysis Information System

(TRAINS) database accessible via the World Integrated Trade Solution (WITS). However, the data

have not been regularly updated in the last 10 years. The new effort on NTM data collection has

started through a joint collaboration between UNCTAD and the World Bank. As of 2011, this

joint effort has produced an updated classification on NTMs as well as detailed new data for

about 30 countries. However, this effort is still far from the ideal data coverage required to

undertake a comparable qualitative analysis on the impact of NTMs among the regions.

The Association of Southeast Asian Nations (ASEAN) member states have initiated

collecting data on NTMs, but due to technical problems, the data is not constantly updated. The

latest NTM data available from the ASEAN secretariat were those reported by members in 2009.

Moreover, these data are not in line with UNCTAD’s new NTM database classification, instead

they are classified based on the old system. The purpose of this chapter is to identify and collect

NTMs in Indonesia, by drawing information from official sources and using the UNCTAD’s NTM

classification and methodology guidelines.

This chapter reports the result of NTM data collection for Indonesia as part of the ERIA–

UNCTAD data collection on ASEAN NTMs using the MAST classification. It focuses mainly on

important findings on the data compilation of Indonesia’s NTMs. Section 2 discusses the

government agencies issuing NTM-related regulations, followed by a discussion on Indonesian

tariff lines and tariff lines covered by NTMs in Section 3. Sections 4 and 5 discuss the type of

NTMs imposed by the government – the Indonesian multiple NTMs. Section 6 presents policy

recommendations.

Table 5.1 presents the comprehensiveness of Indonesian NTM data collection.

Comprehensiveness has become critical when collecting NTM data. Comprehensiveness should

cover not only the coded NTMs, but also most importantly the comprehensiveness of NTM-

related regulations. This is due to the fact that NTM measures are sometimes hidden in the legal

and regulatory NTM-related documents. Therefore, it is important to ensure that 100 percent

of the legal and regulatory NTM-related documents are collected.

For Indonesia, NTM information has been collected from 199 NTM-related regulations.

The regulations are compiled from 14 different government agencies with the total of 638 coded

Chapter 5

67

NTMs. As presented in Table 5.1, those 638 coded NTMs have affected 6,466 Harmonized

System (HS) lines at national tariff lines. This number is equivalent to 65 percent of the total

Indonesian tariff lines.

Table 5.1. Comprehensiveness of Indonesian Non-tariff Measures


1 Total NTM-related regulations 199

2 Total NTMs reported to the WTO 296



a. Total number of affected products 6,466

b. Share of the number of affected products to the number of total products (%) 64.58%

5 Total issuing institutions 14 Source: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data.

2. Government agencies issuing NTMs

A total of 199 NTM-related regulations were identified with 638 coded NTMs. These 199

regulations are distributed among 14 different agencies12 involved in issuing NTMs (Table 5.2).

This implies that the Indonesian legal framework on NTMs is decentralised and, therefore,

compiling all the NTM-related regulations is a challenge. Of these 14 government agencies, the

Ministry of Trade is responsible for issuing the most, almost 40 percent,13 of the total 199 NTM-

related regulations. Meanwhile, the Ministry of Industry is responsible for 30.1 percent of NTM-

related regulations. Other ministries are also active, such as the Ministry of Agriculture at 9

percent, and the Ministry of Energy and Mineral Resources at 3.5 percent.

12 Table 5.1 presents 17 regulatory agencies instead of 14 agencies because it includes (1) the WTO source (item 17), (2) the Ministry of Industry and Trade (item 5), which is basically the MoT before it was merged with the Ministry of Industry before 2005, and (3) the MoT and Ministry of Marine and Fishery (MoMF), which represents a regulation issued jointly by the MoT and MoMF (item 11). 13 This consists of 34.1 percent by the MoT and 5.5 percent by the Ministry of Industry and Trade.


68

Table 5.2. NTM-related Regulations by Regulatory Agency

Number Regulatory Agency Number of Identified

Regulations %

1 Ministry of Trade 68 34.2

2 Ministry of Industry 60 30.2

3 Ministry of Agriculture 18 9.1

4 Ministry of Marine and Fisheries 14 7.0

5 Ministry of Industry and Trade 11 5.5

6 Ministry of Energy and Mineral Resources 7 3.5



9 National Agency of Drug and Food Control 2 1.0

10 State Secretariat 2 1.0

11 Ministry of Trade and Ministry of Marine and Fisheries 1 0.5

12 Ministry of Environment and Forestry 1 0.5

13 The Indonesian National Police 1 0.5

14 Ministry of Communication and Information 1 0.5

15 Ministry of Environment 1 0.5

16 Ministry of Transportation 1 0.5

17 World Trade Organization (the information is provided by the WTO)* 1 0.5

Total 199 100 Note: *) Data on measures of Antidumping, counter failing duties and safeguards are provided by the WTO. The WTO does not issue any regulations. Sources: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data.

Chapter 5

69

Table 5.3. Number of Non-tariff Measures by Issuing Institution

Number Issuing Institution Number of

NTMs


1 Ministry of Trade 186 29.2


3 Ministry of Agriculture 92 14.4

4 Ministry of Marine and Fisheries 70 11.0

5 World Trade Organization (the information is provided by the WTO)* 44 6.9

6 Ministry of Industry and Trade 30 4.7

7 Ministry of Energy and Mineral Resources 17 2.7


9 National Agency of Drug and Food Control 10 1.6

10 State Secretariat 7 1.1

11 Others 20 3.1

TOTAL 638 100 Note: *) Data on measures of Antidumping, counter failing duties and safeguards are provided by the WTO. The WTO does not issue any regulations. Source: Author’s calculations.

On the number of NTMs, Table 5.3 shows that the Ministry of Trade is responsible for

the most, at 29.2 percent, since the ministry has the responsibility to protect consumers and

implement trade safeguards, and thus is tasked to manage import licences and trade regulations

to carry out these objectives. The Ministry of Industry ranks second, covering almost 22 percent

of total NTMs. The Ministry of Agriculture is third, covering 14.4 percent of the total 638 NTMs.

3. Tariff lines covered by non-tariff measures

Table 5.4 presents tariff lines subject to NTMs by product groups. Table 5.4 reveals that

6,466 tariff lines are affected by NTMs in Indonesia. This implies that of the total 10,013 national

tariff lines in Indonesia, 57 percent are affected by NTMs. This is similar to Cadot et al. (2015)

who found that the incidence of NTMs is widespread around the world. Except in Argentina,

Latin American countries are moderate users of NTMs, and so are Cambodia and Indonesia –

two ASEAN countries. In contrast, a number of African countries are heavy users of NTMs, on

par with the European Union.

According to the Indonesian tariff line database, machinery and mechanical appliances,

textiles and clothing, and chemicals are product groups with many tariff lines. Of the product

groups where tariff lines are covered by NTMs, animal and animal products have the most,


70

followed by foodstuffs, and textile and textile products. Almost 100 percent of tariff lines in

animal and animal products is subject to NTMs. Foodstuffs and textiles products are another

product group with the most NTMs. Out of 453 tariff lines, 99 percent of foodstuffs products

are covered by NTMs, while 99 percent of tariff lines textiles products, out of 1167 tariff lines,

is subject to NTMs.

However, important items are noted in Table 5.4. The number of tariff lines covered by

NTMs is not the total NTMs because several tariff lines have more than one NTM. Summing up

the number of NTMs across products, the data reveal a total of 36,609 NTMs in Indonesia.

Textile and textile products contribute the most at 18 percent, followed by Machinery products

at 14 percent, and Chemical and Allied industry at 12 percent.

Table 5.4. Number of Tariff Lines subject to Multiple NTMs, by Product Group


01-05 Animal & Animal Products 11 9 551

06-15 Vegetable Products 74 12 449


25-27 Mineral Products 46 34 110

28-38 Chemicals & Allied Industries 46 200 510

39-40 Plastics/Rubbers 22 15 101

41-43 Raw Hides, Skins, Leather, & Furs 37 25 28

44-49 Wood & Wood Products 19 17 348

50-63 Textiles 2 194 958

64-67 Footwear/Headgear 1 6 33

68-71 Stone/Glass 72 20 70

72-83 Metals 17 15 370

84-85 Machinery/Electrical 98 286 491



Total 650 968 4,848 Source: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data

Chapter 5

71

Table 5.5. Percentage of Tariff Lines subject to Multiple NTMs, by Product Group


4. Types of non-tariff measures imposed by Indonesia

Table 5.6 presents the type of NTMs imposed in Indonesia. The table presents 638

occurrences of NTMs in Indonesia. Of this number, import NTMs account for 88.4 percent, while

export NTMs cover 11.6 percent of the total identified NTMs. Indonesia’s import NTMs are

mostly on technical measures, mainly referring to technical regulations and procedures for

assessing conformity with technical regulations and standards, including measures covered by

the Sanitary and Phytosanitary (SPS) Measures Agreement (A), technical barriers to trade (TBT)

(B), and pre-shipment inspection and other formalities (C). Technical measures contribute to

almost 89 percent of import NTMs, or 79 percent of total NTMs, leaving only 11 percent for

non-technical measures.


01-05 Animal & Animal Products 0% 0% 9%

06-15 Vegetable Products 1% 0% 7%

16-24 Foodstuffs 1% 0% 6%

25-27 Mineral Products 1% 1% 2%

28-38 Chemicals & Allied Industries 1% 3% 8%

39-40 Plastics/Rubbers 0% 0% 2%

41-43 Raw Hides, Skins, Leather, & Furs 1% 0% 0%

44-49 Wood & Wood Products 0% 0% 5%

50-63 Textiles 0% 3% 15%

64-67 Footwear/Headgear 0% 0% 1%

68-71 Stone/Glass 1% 0% 1%

72-83 Metals 0% 0% 6%

84-85 Machinery/Electrical 2% 4% 8%

86-89 Transportation 2% 1% 4%

90-99 Miscellaneous 1% 1% 3%

Total 10% 15% 75%


72

Table 5.6. Types of Non-tariff Measures Imposed by Indonesia

Code NTM by Type

Number of Coded NTMs

NTMs

(%)






F Price control measures, including additional taxes and charges 5 0.8

G Finance measures 0 –


I Trade-related investment measures 0 –


K Restriction on post-sales services 0 –

L Subsidies (excluding export subsidies under P7) 0 –

M Government procurement restrictions 0 –

N Intellectual property 0 –

O Rules of origin 0 –



As presented in Table 5.6, TBT is the most widely used NTM in Indonesia, accounting for

50.6 percent of NTMs, followed by SPS measures at 19.6 percent, and pre-shipment inspection

at 8.6 percent. Among the non-technical measures implemented in the Indonesian NTM

database are non-automatic licensing, quotas, prohibitions, and quantity control measures–

other than SPS or TBT reasons (E); price control measures, including additional taxes and charges

(F); measures affecting competition (H); and distribution restrictions (J).

Table 5.6 also suggest that at the national tariff lines, currently the most widely used

NTM for products is technical measures. There are 19,612 products subject to TBT (37.8

percent), surpassing the number of products whose imports require importers with SPS (36.4

percent). The third most widely used import NTMs is pre-shipment inspection (C), which covers

5,203 products.

Indonesia’s NTMs data compilation also reveals that 66 types of NTMs have been

imposed in Indonesia. Out of these types, the most commonly used in Indonesia is the

authorisation requirement for TBT reasons. There are 4,737 tariff lines subject to authorisation

requirement for TBT reasons, which cover 12.94 percent of total NTMs. The second most

Chapter 5

73

common is traceability information requirements, with a total of 3,671 tariff lines subject to this

measure, accounting for 10.03 percent of total NTMs. The third most used NTM is registration

requirements for importer for TBT reason, and the fourth is pre-shipment inspection. There are

2,367 tariff lines (or 6.47 percent of total NTMs) and 2,366 tariff lines (or 4.47 percent of total

NTMs) subjected to this measure. Other measures that are commonly used in Indonesia are

export registration, which accounts for 2,181 tariff lines (5.96 percent); labelling requirements

for TBT reasons for 2,062 tariff lines (5.63 percent); labelling requirements for SPS reasons for

1,630 tariff lines (4.45 percent);and 1,533 tariff lines requiring measures to pass through

specified port of customs (4.19 percent).

5. Multiple non-tariff measures

Another interesting note on NTMs imposed by Indonesia is that the imposition is

characterised by the simultaneous application of many measures (multiple NTMs) to the same

product, as shown in Figures 5.1 and 5.2. This can translate into complicated compliance

verification processes for traders. Figure 5.1 shows the multiple NTMs on total NTMs (total

affected products). From Figure 5.1, the results show that 92 percent of Indonesia’s products

are subject to multiple NTMs, while only 6.12 percent of Indonesia’s tariff lines are subject to

two NTMs, and 1.81 percent to one NTM.


74

Figure 5.1. Indonesian Tariff Lines subject to Multiple NTMs, by Products (%)


Based on Figure 5.2, most of Indonesia’s product groups have total NTMs exceeding

their total number of tariff lines. This indicates that some products within that group are subject

to more than one NTM, compared to the number of tariff lines in each product. Vegetable

products and textile and textile products have the highest NTM per tariff lines.

The number of tariff lines covered by NTMs is 6,466 – and this is not the total number

of because several tariff lines have more than one NTM. Summing up all NTMs across the 10-

digit Harmonized System (HS) level, data reveal that the total number of NTMs is 36,609. Some

of those NTMs might have legitimate reasons. Some NTMs are policy measures on security or

public health, such as transport of firearms or explosives, and trade in dangerous chemicals and

radioactive materials. A number of NTMs are to ban the trade of certain items, such as opium

and narcotic drugs.

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

1 NTMs 2 NTMs 3 NTMs or more

Chapter 5

75

Figure 5.2. Indonesian Tariff Lines subject to Multiple NTMs, by Products


Figure 5.2 shows that most product groups have three NTMs or more.14 Of animal and

animal products, 96.5 percent are subject to three or more NTMs, while 92 percent of metal

products, and 90 percent of wood and wood products are both subject to three or more NTMs.

6. Recommendations

From the previous analysis, findings reveal that cases of multiple NTMs are common in

Indonesia, where almost 92 percent of products are subject to three or more NTMs, with some

of these coming from a single regulatory agency, while others come from multiple regulatory

agencies. The following are some policy recommendations for Indonesia:

Undertake a regular review of existing policies and regulations to identify policies and

regulations that are impacting negatively on customers, and which are not achieving the

government’s objectives.

Improve the coordination with other government agencies when issuing trade

regulations.

14 As presented in Figure 5.1, the total products that are subject to three or more NTMs are 92 percent.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1 NTMs 2 NTMs 3 NTMs or more


76

Set up a regulatory and/or oversight body with strong analytical capabilities on NTMs.

This body must be competent and capable of designing better NTMs, and in conducting a deeper

analysis on the impact of this complex regime, which could cause significant costs and delays for

Indonesian businesses and consumers. According to the World Bank (2008), best practice

suggests that a regulatory and/or oversight body should not be located in a line ministry as other

ministries could resent being put under that authority. Instead, the regulatory and/or oversight

body should be placed either under the Prime Minister’s or the President’s authority, or be set

up as an independent body.

References

Cadot, O., E. Munadi, and L.Y. Ing (2015), ‘Streamlining Non-tariff Measures in ASEAN: The Way Forward’, Asian Economic Papers, 14(1), 35–70.

Nicita, A. and J. Gourdon (2013), ‘A Preliminary Analysis on Newly Collected Data on Non-Tariff Measures’, UNCTAD Policy Issues in International Trade and Commodities Study Series No. 53. New York and Geneva: United Nations Conference on Trade and Development.

United Nations Conference on Trade and Development (UNCTAD) (2013), Non-tariff Measures to Trade: Economic and Policy Issues for Developing Countries. Developing Countries in International Trade Studies. New York and Geneva: United Nations.

World Bank (2008), Regulatory Transformation in Mexico, 1988–2000. Case Studies on Reform Implementation Experience. Washington, DC: World Bank.

World Trade Organization (WTO) (2012), World Trade Report 2012. Trade and Public Policies: A Closer Look at Non-tariff Measures in the 21st Century. Geneva: World Trade Organization.

77

CHAPTER 6

Non-tariff Measures in the Lao People’s Democratic Republic

Amphaphone Sayasenh15

National Economic Research Institute, Lao People’s Democratic Republic

1. Introduction

Since the introduction of the New Economic Mechanism in 1986, the Lao People’s

Democratic Republic (Lao PDR) has liberalized its trade through unilateral tariff reduction.

Hence, its highest tariff rate is now 40 percent, down from 150 percent in 1995; and over half

of its tariffs are under 5 percent. Its tariff regime has become more liberal when the country

came under the umbrella of the Association of Southeast Asian Nations (ASEAN), which accounts

for most of the country’s trade. Under ASEAN, currently 89 percent of the total products have

an import tariff of 0 percent and the proportion will increase to 96 percent in 2018. As in many

other countries, non-tariff measures (NTMs) are gaining importance in controlling and

hampering the flow of international trade. Several ministries in the Lao PDR are involved in

formulating and implementing such regulations that may have a trade impact, and frequently

new regulations are developed with little regard to the negative impact these may have on the

trading community.

The Economic Research Institute for ASEAN and East Asia (ERIA), in collaboration with

the United Nations Conference on Trade and Development (UNCTAD), has collected NTM data

for all ASEAN countries. Based on this dataset, this chapter aims to provide insight on NTMs in

the Lao PDR.

Table 6.1 summarizes the comprehensiveness of the data on NTMs for Lao PDR. There

are a total of 70 NTM-related regulations. These regulations yield 301 NTMs, which is many folds

higher than a number of NTMs reported to the WTO of 12 NTMs. In addition, those 70 NTM-

related regulations are issued by 14 institutions. Interestingly, Table 6.1 reveals that every tariff

line is affected by at least one NTM.

15 The researcher would like to thank Mr. Saygnasak Sengaloun and Mrs. Phonesavanh Sittideth for their assistance in compiling NTM data of Lao PDR.


78

Table 6.1. Comprehensiveness of Non-tariff Measures







b. Share of the number of affected products to the number of total products (%) 100%


2. Types and sources of legal documents

According to the Law on Legislation Making (2012), the country’s legislation of general

application consists of the following: (1) the Constitution; (2) laws; (3) resolutions of the National

Assembly; (4) resolutions of the Standing Committee of the National Assembly; (5) Ordinances

of the President; (6) decrees of the government; (7) resolutions of the government; (8) orders

and decisions of the Prime Minister; (9) orders, decisions, and instructions of the minister,

minister-equivalent, and head of a government authority; (10) orders, decisions, and

instructions of the provincial governors and capital governors; (11) orders and decisions of the

district and municipality chiefs; and (12) village regulations.

As illustrated in Table 6.1, among the legal documents, 70 contain non-tariff measures.

Two-thirds of the legal documents with NTMs are decisions and instructions of the ministers

and one-fifth are laws.

All legal documents are officially in the Lao language and most of them can be found in

two main electronic sources – the Lao Official Gazette and the Lao Trade Portal. The Lao Trade

Portal also provides unofficial English translation to a number of laws and regulations.

3. Non-tariff measures in the Lao PDR

To better understand NTMs in the Lao PDR, NTM data were analysed in detail. It may be

noted that NTM data analysis started at the measure level. That means regardless of a number

of tariff lines affected, each registered measure is counted as one. For example, Decree on the

Control of the Movement of Animals and Animal Products, number 230/GOL dated on 4th June

2012, indicates that ‘To import of livestock and animal products, the import permit issued

designated by the relevant department of the Ministry of Agriculture and Forestry is required’.

This is an NTM and classified as A14 according to UNCTAD’s February 2012 Version

Chapter 6

79

Classification. This measure affects 913 national tariff lines. It is, however, counted as one

measure. The national tariff line of the Lao PDR is at 8-digit HS Code and the total number of

tariff lines is 9,558.

Table 6.2 shows a total of 301 measures registered and it may be noted that all the

national tariff lines are affected by at least one NTM. Among all registered measures, the

technical barriers to trade (B chapter, NTM code) accounts for the largest share at 30.2 percent

and affects 19.4 percent of all the national tariff lines. Interestingly, export-related measures (P

chapter, NTM code) account for 27.2 percent and affect 35.8 percent of all tariff lines. Price

control measures (F chapter, NTM code) accounts for 15.9 percent but affects all the national

tariff lines. Sanitary and phytosanitary (SPS) measures (A chapter, NTM code) accounts for 12.6

percent and affects about 21 percent of all tariff lines. Share of chapter E on non-technical

licensing, quotas, prohibition and quantitative measures is 8.6 percent of all measures, but they

affect only 4.6 percent of all tariff lines. Pre-shipment inspection and other formality measures

(C chapter, NTM code) account for a smaller share, at 4.7 percent of total NTMs, but affect a

sizeable portion or 24.3 percent of tariff lines. Measures under F chapter account for less than

1 percent of all measures. Measures under chapter D, H and I were not found.


80

Table 6.2. Non-tariff Measures by Type

NTM = Non-tariff Measure. Notes: The classification and NTMs codes follow the UNCTAD Classification, 2012 Version. The ERIA–UNCTAD’s data collection of NTMs for ASEAN countries does not include the collection of J–O NTMs. Sources: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data.

Table 6.3 gives an overview of the number of measures by each issuing agency. Data

show that NTMs involved not only commerce agencies but other line ministries. Measures

issued by Ministry of Industry and Commerce account for 18.6 percent of a total number of

measures. The largest share of NTMs comes from Ministry of Agriculture and Forestry, 19.9

percent. The government’s office and Ministry of Health both have about 18 percent share of

all NTMs. Measures issued by the Ministry of Finance account for 7.3 percent. Other line

ministries have their own shares from the total number of NTMs at less than 3.5 percent.





D Contingent trade protective measures 0 0


F Price control measures, including additional taxes and charges 48 15.9


H Measures affecting competition 0 0

I Trade-related investment measures 0 0

J Distribution restrictions

K Restriction on post-sales services

L Subsidies (excluding export subsidies under P7)

M Government procurement restrictions

N Intellectual property

O Rules of origin


Total coded NTMs 301 100

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Table 6.3. Non-tariff Measures by Issuing Agency

Number Issuing Agency Number of NTMs Total NTMs

(%)

1 Government's Office 55 18.3



4 Ministry Agriculture and Forestry 60 19.9

5 Ministry of Natural Resource and Environment 6 2.0

6 Ministry of Industry and Commerce 56 18.6

7 Ministry of Public Work and Transport 7 2.3

8 Ministry of Energy and Mine 6 2.0

9 Ministry of National Defence 9 3.0

10 Ministry of Information Culture and Tourism 10 3.3

11 Ministry of Telecommunication and Post 6 2.0

12 President's Office 1 0.3

13 Bank of Lao PDR 9 3.0

14 Ministry of Home Affairs 1 0.3

Total 301 100 Sources: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data.

Figure 6.1 shows the ‘depth’ of NTMs in each product group. More than 95 percent of

animal products, vegetable products, and foodstuffs are subject to three or more NTMs.

Similarly, a large number of transportation (88 percent) and mineral products (76 percent) are

subject to three or more NTMs. The rest of the product groups have the majority of their tariff

lines subject to two NTMs. If all the product groups were combined, figures show that 58

percent of all tariff lines were subject to two NTMs, 41 percent of all tariff lines were subject to

three or more NTMs, and 1 percent is subject to one NTM.

Complementing Figure 6.1, Figure 6.2 shows the average number of NTMs faced by each

group of products. As shown, the number of NTMs faced by each group of product varies

substantially. Animal and animal products are affected by more than 22 NTMs on average—

where nine NTMs are SPS and seven NTMs are export-related measures. Similarly, vegetable

products also face as high as 20 NTMs on average—with nine on SPS, six on export-related

measures and 5 on price control and pre-shipment measures. Another group of products that

faces a large number of NTMs is foodstuffs. On average, foodstuffs is subject to 17 NTMs—eight

SPS, five price control measures, and four export-related measures. On the other hand, raw

hides and skins, footwear, and textiles are subject to only two NTMs on average; and

plastics/rubbers, stone/glass, and miscellaneous products are subject to less than five NTMs.


82

Figure 6.1. Tariff lines in Each Product Group Affected by One or More Non-tariff Measure (%)

Sources: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data.

Figure 6.2. Average Number of Non-tariff Measures Faced by Product Group

Sources: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data.

4. Other observations

In February 2013, the Lao PDR became a member of the World Trade Organization (WTO).

The process of WTO membership, coupled with regional integration, has contributed to a great

extent to improving the legal environment of the country. Over the past few years, a large

number of amended laws and new legislations have been approved. The improvement of the

- 5 10 15 20 25

Animal & Animal Products

Vegetable Products

Foodstuffs

Mineral Products

Chemicals & Allied Industries

Plastics / Rubbers

Raw Hides, Skins, Leather, & Furs

Wood & Wood Products

Textiles

Footwear / Headgear

Stone / Glass

Metals

Machinery / Electrical

Transportation

Miscellaneous

Type A NTMs

Type B NTMs

Type C NTMs

Type E NTMs

Type F NTMs

Type G NTMs

Type P NTMs

0

10

20

30

40

50

60

70

80

90

100

1 NTM 2 NTMs 3 NTMs or more

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83

legal environment is, however, an ongoing process. It is expected that a number of legislations

will be issued in the coming years, which will likely change the NTMs stock of the Lao PDR.

The analysis above suggests that most of the regulations that contain NTMs are

legislations at the ministry level. However, unlike the country’s standard laws, ministry-level

legislations are not readily available and accessible. Even within the ministry, stock-keeping of

legislation is not centralised but rather kept within the issuing departments. This causes, to some

extent, redundancy of regulations as some agencies issue new regulations without taking into

account the existing ones. This style of stock-keeping of regulations also hinders the efforts to

collect a comprehensive NTM data in the future.

The large number of NTMs issued by various line ministries highlights the importance of

enhancing the awareness and knowledge on NTMs. The high incidence of NTMs also reflects the

situation where line agencies might have low awareness or knowledge of NTMs and that they

do not fully realize the potential impact these regulations could have on trade. The high

incidence, depth, and large presence of non-technical measures suggest that there is an urgent

need to streamline NTMs in the Lao PDR.

As part of WTO membership and ASEAN commitments, the Lao PDR is already engaged in

modest streamlining of its stock of NTMs. The Ministry of Industry and Commerce has, through

the Trade Development Fund supported by development partners, set up a clear agenda to

streamline the NTMs of the Lao PDR in the coming years. The ministry has already taken

initiatives by forming the NTMs review working group with representatives coming from line

ministries, the private sector, and research institutes. In addition, the ministry has also collected

data on NTMs and made the NTM database available at its trade portal.

5. Recommendations

The findings that both the incidence and depth of NTMs are high in the Lao PDR suggest

that there is an urgent need to streamline NTMs in the country. Taking into consideration the

initiatives already taken by the Ministry of Industry and Commerce, this chapter provides the

following policy recommendations:

The Ministry of Industry and Commerce needs to keep its momentum in streamlining

NTMs. In addition to forming the NTMs review working group, it needs to include

NTM issues in the agenda for trade-related meetings among high-ranking officials to

gain political traction and support in streamlining the NTMs. The political support

from line ministries is necessary because NTMs involve not only the Ministry of


84

Industry and Commerce but also other line ministries where the majority of NTMs

originate.

The Ministry of Industry and Commerce could make use of the ERIA–UNCTAD NTM

database to complement its database, which can increase comprehensiveness and

become more up-to-date.

It is necessary to enhance the knowledge and capacity of stakeholders on NTMs. NTM

data collection and analysis, as well as streamlining efforts, should be pursued and

enhanced further. To ensure the sustainability of knowledge and the capacity-

building process, training of trainers should be undertaken. This will ensure the

availability of local and in-house expertise in line agencies. As noted earlier, some line

agencies have limited awareness on the potential impact their regulations could have

on trade. The participation of local academic and research institutions should be

encouraged.

Line ministries and government agencies need to stocktake their regulation functions

and improve the stock keeping of those regulations. All regulations should be readily

available and accessible. Centralized sources, such as the Lao Official Gazette and the

Lao Trade Portal, should be optimally utilized. This will not only improve the collection

of NTM data but also improve the legal environment of the country.

As more legislation is expected to be issued in the coming years – driven by WTO

membership and the ASEAN integration – timely and regular updating of the NTM

database in the next few years should be undertaken. The frequency of updating the

database could be less in later years.

References

Government of the Lao People’s Democratic Republic, Ministry of Industry and Commerce (2015), Lao Trade Portal 2015. Available at: http://www.laotradeportal.gov.la/ (accessed 29 December 2015).

Government of the Lao People’s Democratic Republic, Ministry of Justice (2015), Lao Official Gazette, 2015. Available at: http://laoofficialgazette.gov.la/ (accessed 29 December 2015).

Government of the Lao People’s Democratic Republic, National Assembly (2012), Law on Legislation Making. Vientiane: Government of Lao PDR.

http://www.laotradeportal.gov.la/

http://laoofficialgazette.gov.la/

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85

United Nations Conference on Trade and Development (UNCTAD) (2012), Non-Tariff Measures to Trade: Economic and Policy Issues for Developing Countries. Geneva: United Nations Conference on Trade and Development.

United Nations Conference on Trade and Development (UNCTAD) (2013), Classification of Non-tariff Measures, February 2012 Version. Geneva: United Nations Conference on Trade and Development.

87

CHAPTER 7

Non-tariff Measures in Malaysia

Evelyn S. Devadason, V.G.R. Chandran, and Tang Tuck Cheong University of Malaya, Kuala Lumpur, Malaysia

1. Introduction

Regulatory heterogeneity is a challenge for increasing trade, harmonizing standards,

and creating an integrated Association of Southeast Asian Nations (ASEAN) single market. A

significant number of non-tariff measures (NTMs)16 prevail, including non-tariff barriers

(NTBs)17 (RSIS, 2013), arising primarily from diverse national standards and regulations

(Pettman, 2013; Norani, 2014).

Efforts are underway to harmonize regulatory standards under the ASEAN Economic

Community (AEC). However, there are information shortcomings on the extent of the diversity

of NTMs in the various sectors within the ASEAN countries. The picture on NTMs remains

sketchy, as the existing databases lack complete information. For this purpose, there is a need

for a nuanced understanding on the types and forms of standards and regulations imposed by

the member nations not just for recognizing regional measures but also for allowing member

nations to adopt each other’s regulations and plausibly harmonize some standards within the

region.

This chapter constructs and applies a new database to provide a comprehensive

assessment of NTMs from the Malaysian perspective. More specifically, the chapter details the

diverse types of NTMs for the various sectors based on acts and regulations that prescribe the

conditions for importing into and exporting from Malaysia.

16 NTMs are policy measures, other than ordinary customs tariffs, that can potentially have an economic effect on the international trade in goods, changing quantities traded or prices, or both (UNCTAD, 2010). 17 Not all NTMs are NTBs.


88

2. Non-tariff measures database

This chapter deals only with public regulations and standards set by the government

measures. The NTMs are drawn directly from a total of 64 related acts and regulations in

Malaysia.18 Only laws19 enacted by the federal legislature are compiled in the database.

The Food Regulations 198520 of the Food Act 1983,21 which regulate the various

aspects of food standards in Malaysia, are analysed separately in this chapter. The reason for

this is that the food sector is highly regulated. All food, beverage, and edible agricultural

products manufactured locally or imported are required to comply with the guidelines

stipulated in the Food Regulations 1985.

The NTMs are based on the classification of import and export measures by the United

Nations Conference on Trade and Development (UNCTAD). The database and classification

applied in this chapter is considered to be more comprehensive than the measures depicted in

the current ASEAN database.22

3. Overview of non-tariff measures

Table 7.1 provides some general statistics on the NTMs in Malaysia based on the newly

constructed database. Clearly, the number of notifications made at the World Trade

Organization (WTO) is not a reflection of the number of NTMs in the country (see also Cadot et

al., 2013; Malouche et al., 2013). The total number of NTMs recorded for Malaysia is 713,

affecting approximately 54 percent of the total tariff lines.

18 If the act comes with corresponding regulation(s), only the latter is compiled for the database. This is because regulations, commonly known as ‘subsidiary legislations’, are more specific in the description as they are guidelines that dictate how the provisions of the act are applied. The reference to regulations will also avoid any redundancy in coding of the NTMs. 19 Malaysian written laws are contained in codes and statutes, known as acts, ordinances, and enactments. Acts are laws enacted by the Parliament. Ordinances and enactments refer to laws enacted by state legislative assemblies. 20 Until 2014, several amendments of the regulations have been made. 21 There are four regulations under the Food Act 1983: Food Export (Issuance of Health Certificate for Export of Fish and Fish Product to the European Union) Regulation 2009, Food Regulations 1985 (amended 2014), Food Hygiene Regulations 2009 (amended 2014), and Control of Tobacco Product Regulations 2004 (amended 2013). 22 NTM database for ASEAN. http://www.asean.org/communities/asean-economic-community/item/non-tariff-measures-database.

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89

Table 7.1. Non-tariff Measures in Malaysia

No. Comprehensiveness Number


2 Total NTM reported to the WTO 252





5 Total issuing institutions 13 Notes: The total number of notifications made at the WTO by Malaysia for TBTs is 216 and for SPS, 36. Source: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data.

Of the total 13 ministries that administer the acts and regulations with trade-related

measures, the Ministry of Health is considered the most important, based on the number of

NTMs found in the written laws that come under its portfolio (Table 7.2).

Table 7.2. Non-tariff Measures in Malaysia, by Issuing Institutions

Source: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data.

Overall, the NTMs in Malaysia are highly concentrated as they are distributed only

across seven out of the 16 chapters (Table 7.3). Technical measures dominate the NTMs as

they constitute 84 percent of total reported NTMs.

Number Issuing Institutions Number of

NTMs %


2 Ministry of Agriculture and Agro-Based Industry 86 12.1

3 Ministry of Natural Resources and Environment 39 5.5

4 Ministry of Plantation Industries and Commodities 27 3.8

5 Ministry of Human Resources Malaysia 14 2.0


7 Ministry of Foreign Affairs 9 1.3

8 Ministry of Home Affairs 8 1.1

9 Energy Commission 5 0.7

10 Malaysian Communications and Multimedia Commission 4 0.6

11 Other Institutions 6 0.8

Total 713 100


90

Table 7.3. Non-tariff Measures in Malaysia, by Non-tariff Measure Type

Code NTM Type Number of NTMs %

A Sanitary and phytosanitary measures 259 36.3

B Technical barriers to trade 332 46.6







Technical Measures 596 83.6

Non-technical Measures 117 16.4

Total coded NTMs 713 100 Source: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data.

4. Special case: the food sector

4.1. Food standards, regulations, and international trade

Governments usually set standards for food imports that require foreign producers to

meet same standards required of domestic producers (Mitchell, 2003). Likewise, ASEAN

member countries are found to arbitrarily adopt food control systems under sanitary and

phytosanitary (SPS) measures for imports, despite the fact that ASEAN has several bodies23

dealing with food safety (RSIS, 2013). The food sector is therefore highly regulated, with

various measures related to product characteristics, production, processing, and distribution.

The complexity in regulations for the food sector reflect consumers’ demand for food safety,

firms’ reputation for providing safe food and maintaining global market shares, and new

hazards that surface in global food trade. These regulations, however, differ across countries

in terms of types/forms and desired/ stringency levels, for example, different levels of

tolerance for food safety risks and different levels of accidental contamination. The regulations

also differ significantly across food types, such as raw and processed food, less and highly

perishable food products, and products with low or high incidence of risks for human health.

Hence, differences in regulations, resulting from differences in regulatory approaches

and capacity and consumer risk preferences, result in multiple safety regimes that could

23 These bodies include the ASEAN Expert Group on Food Safety, the ASEAN Task Force on Codex, the ASEAN Consultative Committee on Standards and Quality, and the ASEAN Sub-Committee on Food Science and Technology.

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91

disrupt trade and cause conflict between countries. However, Buzby and Unnevehr (2003)

argue that these differences could in fact spark more dialogue between countries, leading to

change and improvement in the food safety systems. Further, some argue that implementing

food safety standards represents increased compliance costs to firms. Standards may

therefore act as a barrier to trade. Notwithstanding that, standards can solve information

asymmetries between buyers and sellers and reduce transaction costs (Schuster and

Maertens, 2015; Athukorala and Jayasuriya, 2003).

4.2. Regional source for food imports

Malaysia’s food imports from ASEAN recorded an average annual growth rate of 15.9

percent relative to global food imports at 12.5 percent for 2000–2014 (Figure 7.1). Imports of

food from the region rose from US$80 million in 2000 to US$4,408 million in 2014. The region

is considered an important import source for food24 (RSIS, 2013); it represents 30.4 percent of

Malaysia’s global imports of food in 2014. On a regional level, food is also identified as a

potential sector to derive benefits when the AEC fully rolls out (Pettman, 2013).

By categories of food products, high import concentration is noted, with fats, animal,

and vegetable (Harmonized System [HS]15), fish, crustaceans (HS03), cereal, flour, starch

(HS19), cereals (HS10), and cocoa (HS18) accounting for more than 60 percent of total imports

from ASEAN (Table 7.4). The same products account for large shares in total imports of

Malaysia from the world. The only exception is that though ASEAN is not an important source

for dairy products, these imports constitute a relatively larger share of global imports to

Malaysia.

Within ASEAN, food products are mainly imported from Indonesia and Thailand (Figure

7.2). While Indonesia gained in terms of import market share of Malaysia for food products

between 2000 and 2014, the opposite holds for Thailand where the reduction in import

reflects the growing importance of Singapore and Viet Nam as food import sources for

Malaysia. The four major import markets for food products serve the Malaysian market for

different food categories.

24 The move towards the AEC has increased intra-ASEAN trade, largely due to the increase in processed food trade.


92

Figure 7.1. Malaysia – Food Imports from ASEAN and the World (US$ million)

ASEAN = Association of Southeast Asian Nations. Source: Calculated from UN COMTRADE.

The varying market and product concentration of food imports from the region

suggest that NTMs are also going to affect the member states disproportionately. Efforts to

harmonize standards within the region should also account for the intensity of trade across

the different food subsectors.

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Table 7.4. Malaysia – Import Concentration of Food Products from ASEAN and the World (%)

Malaysia–ASEAN Malaysia–World 2000 2014

HS Category 2000 2006 2014 2000 2006 2014 SGP THAI INDO VNM SGP THAI INDO VNM

HS 02 Meat, edible 0.79 0.10 0.86 6.18 4.25 6.12 0.10 1.21 0.17 2.56 0.37 2.15 0.00 1.57

HS 03 Fish, crustaceans 19.76 10.45 9.03 8.36 8.05 6.63 4.12 22.16 19.94 12.37 1.34 8.01 9.89 14.45

HS 04 Dairy products 1.42 2.45 0.42 9.66 7.19 8.06 0.75 0.10 3.71 0.66 1.80 0.12 0.21 0.63

HS 07 Edible vegetables 6.21 4.55 2.72 7.70 7.22 5.24 0.10 7.72 2.47 1.43 0.15 3.29 0.35 6.90

HS 08 Edible fruits, nuts 2.50 1.11 2.03 3.54 2.31 3.63 0.01 4.81 1.18 0.21 0.25 3.29 1.19 1.67

HS 09 Coffee, tea, spices 4.93 3.80 4.70 3.07 3.28 3.81 4.64 0.20 8.92 18.44 2.49 0.15 5.62 19.27

HS 10 Cereals 17.10 13.84 8.66 19.72 15.47 12.93 2.61 30.15 0.37 48.02 0.11 14.14 0.01 33.30

HS 11 Milling products 2.93 2.27 3.49 3.09 1.97 2.89 1.47 6.35 0.24 0.44 0.92 9.04 0.64 3.60

HS 12 Oilseeds 3.10 1.73 0.82 7.27 4.41 3.66 0.05 0.59 5.89 7.27 0.05 1.03 0.69 1.31

HS 13 Lac, gums, resins 0.18 0.09 0.13 0.40 0.39 0.34 0.31 0.02 0.24 0.00 0.14 0.03 0.18 0.00

HS 15 Fats, animal and vegetable 11.27 24.30 23.61 4.74 11.60 9.85 9.01 1.26 21.43 2.55 4.59 8.07 47.29 3.25

HS 16 Meat and fish preparations 1.99 1.39 1.04 1.07 0.89 0.93 1.52 3.49 0.13 4.67 0.69 2.23 0.30 1.13

HS 17 Sugars 5.34 1.49 7.74 8.80 7.27 7.83 0.67 10.16 1.76 0.03 0.54 23.33 0.46 3.50

HS 18 Cocoa 8.96 16.95 9.76 3.15 11.71 9.04 3.78 0.14 24.97 0.00 10.20 0.55 19.47 1.45

HS 19 Cereal, flour, starch 6.95 8.12 10.22 4.64 4.92 5.44 34.61 4.76 5.39 0.37 19.17 10.65 6.99 0.60 HS 20 Vegetable and fruit preparations 1.27 0.67 1.12 1.92 1.48 2.16 2.95 2.21 0.15 0.42 0.99 2.51 0.19 0.48 HS 21 Miscellaneous edible preparations 4.40 4.02 9.16 4.98 4.61 6.49 21.96 4.50 2.86 0.51 34.60 6.50 6.35 3.96

HS 22 Beverages 0.91 2.66 4.49 1.72 2.97 4.95 11.33 0.16 0.18 0.04 21.59 4.90 0.15 2.92 HS = Harmonized System; INDO = Indonesia; SGP = Singapore; THAI = Thailand; VNM = Viet Nam. Source: Calculated from UN COMTRADE.


94

Figure 7.2. Malaysia – Geographical Concentration of Food Imports from ASEAN, 2000 and 2014 (%)

2000

2014

ASEAN = Association of Southeast Asian Nations; Lao PDR = Lao People’s Democratic Republic. Source: Calculated from UN COMTRADE.

4.3. Food safety standards in Malaysia

A total of 488 NTMs, affecting 1,349 tariff lines, are found in the food regulations, and

all of which comprise technical measures. Within the technical measures category, 55 percent

constitute technical barriers to trade (TBTs)25 and the remaining 45 percent are SPS

measures.26 Since all NTMs hail from the TBT and SPS chapters, Table 7.5 reports the

frequency counts of NTMs within those two chapters.27

25 TBTs are also the major impediment for the expansion of regional and global trade in processed food (AFBA, 2014). 26 The SPS refers to measures to protect human, animal or plant life, or health. 27 There are 42 and 31 sub-chapters for SPS and TBT, respectively, based on the UNCTAD classification.

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Table 7.5. Frequency Counts of Non-tariff Measures for Sanitary and Phytosanitary and Technical Barriers to Trade Chapters

SPS = sanitary and phytosanitary; TBT = technical barriers to trade. Source: Derived from the Food Regulations 1985.

Labelling requirements are even more important for a country like Malaysia, where

more than half the population is Muslim, as such requirements apply to products containing

pork and alcohol. In addition, among the ASEAN countries that follow the Codex Alimentarius

guidelines,28 only Malaysia makes nutrition labelling mandatory for energy, protein,

carbohydrate, fat, and total sugars for foods that are commonly consumed (bread and milk,

canned meat, fish, vegetables, fruit and fruit juices, salad dressing and mayonnaise), and for

various types of beverages (Kasapila and Sharifudin, 2011; Pettman, 2013).

28 For other ASEAN countries that follow the Codex Alimentarius guidelines, nutrition food labelling is voluntary, unless nutrition or health claims are made on food packaging or if the food is for a special purpose (diabetic and fortified foods).

A SPS Number %

A14 Special authorisation requirement for SPS reasons 4 1.8

A19 Prohibitions/restrictions of imports for SPS reasons n.e.s. 1 0.4

A21 Tolerance limits for residues of or contamination by certain (non-

microbiological) substances

1 0.4

A22 Restricted use of certain substances in foods and feeds and their

contact materials

125 56.3

A31 Labelling requirements 66 29.7

A33 Packaging requirements 9 4.1

A41 Microbiological criteria of the final product 1 0.4

A42 Hygienic practices during production 3 1.3

A51 Cold/heat treatment 6 2.7

A63 Food and feed processing 1 0.4

A64 Storage and transport conditions 1 0.4

A82 Testing requirement 4 1.8

B SPS 222 100

B31 Labelling requirements 65 24.4

B6 Product identity requirement 37 13.9

B7 Product quality or performance requirement 164 61.6

TBT 266 100


96

Within the 28 subcategories of the food sector, the frequency count of NTMs is

highest for (i) salt and spice followed by (ii) sweetening substance, (iii) edible fat and edible oil,

(iii) alcoholic beverage, and (v) tea, coffee, chicory, and related products (Table 7.6).

4.4. Harmonization of food trade in ASEAN: some thoughts

ASEAN members have begun to recognize the desirability of having common

measures. For trade purposes, harmonization of standards enables food companies to adhere

to one set of regional regulations instead of adjusting to a diverse array of regional standards

of member countries. Following which, ASEAN members have expressed their intention to use

global food standards29 as a basis for harmonization efforts in the food sector at the regional

level. Yet, there has not been much progress in this regard (AFBA, 2012).

One reason is that the diverse regulations that govern food and nutrition labelling

across ASEAN rest on the different international guidelines followed by member countries

when preparing national regulations. Kasapila and Sharifudin (2011) point out that for food

and nutrition labelling, Singapore, Malaysia, Brunei, Lao People’s Democratic Republic, Viet

Nam, and Cambodia have followed the Codex guidelines30 in preparing their regulations.

Conversely, Thailand and the Philippines, to some extent, have adopted the United States

nutrition labelling guidelines. Further, member countries with more developed food safety

systems have also adopted the ‘hazards’-based approach, which does not allow for regulatory

convergence, as there is no common basis for the adoption of common food safety standards.

What is needed is a shift towards a ‘risk’-based approach, which comes with a scientific basis

(see also Henson and Caswell, 1999), to adopt common safety standards.

29 Organizations that are working to harmonize regulations in the food sector include Codex Alimentarius, the World Trade Organization, the Food and Agricultural Organization, the World Health Organization, the International Standardization Organization, the Global Harmonization Initiative, and the International Union of Food Science and Technology. 30 The Codex Alimentarius is significantly relevant for international food trade, as the food standard issues cover specific raw and processed materials characteristics, food hygiene, pesticides, residues, contaminants, and labelling and sampling methods.

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Table 7.6. Frequency Counts of Non-tariff Measures for Sanitary and Phytosanitary and Technical Barriers to Trade Chapters, by Product Group

Product Category No. A14 A19 A21 A22 A31 A33 A41 A42 A51 A63 A64 A82 B31 B6 B7 Cereal, cereal product, starch and bread 25 8 3 3 3 8 Malt and malt extract 4 1 1 2 Food aerating substance 9 1 3 3 2 Milk and milk product 2 1 1 Sweetening substance 44 1 17 5 2 4 1 14 Confection 8 1 4 1 1 1 Meat and meat product 25 1 4 4 1 4 3 8 Fish and fish product 26 5 3 1 1 1 3 2 10 Egg and egg product 7 1 3 1 1 1 Edible bird’s nest and edible bird's nest product 2 1 1 Edible fat and edible oil 44 19 2 2 21 Vegetable and vegetable product 20 4 3 2 1 2 3 1 4 Soup and soup stock 2 1 1 Fruit and fruit product 24 5 4 2 4 9 Jam, fruit jelly, marmalade, and seri kaya 7 2 2 3 Nut and nut product 11 5 1 5 Tea, coffee, chicory, and related product 34 6 8 8 3 9 Cocoa and cocoa product 8 4 2 2 Milk shake 1 1 Salt and spice 70 23 3 3 8 33 Vinegar, sauce, chutney, and pickle 16 1 4 2 3 6 Soft drink 19 2 5 5 3 4 Natural mineral water 0 Packaged drinking water 4 1 1 1 1 Alcoholic beverage 42 8 5 1 6 8 14 Shandy 3 1 1 1 Special purpose food 23 5 5 1 1 5 2 4 Water, ice, or steam 3 1 2 FOOD PRODUCTS* 5 1 1 1 1 1

Total 488 4 1 1 125 66 9 1 3 6 1 1 4 65 37 164 Note: *Includes the general requirements for food products obtained through modern biotechnology. These guidelines were enforced on 8 July 2014. Source: Derived from the Food Regulations 1985.


98

Notwithstanding the differences in the regulatory framework of member countries,

various efforts are already underway to address the issue of harmonization. The ASEAN

Consultative Committee on Standards and Quality and the ASEAN Consultative Committee on

Standards and Quality Prepared Foodstuff Products Working Group are both responsible for

the harmonization and convergence of food safety and quality standards. Following which,

several initiatives have been launched. The ASEAN Common Principles of Food Control System,

which includes regional requirements for the labelling of pre-packaged foodstuffs, provides

some direction for member countries to align their national food and nutrition regulations

with those generic labelling requirements. The ASEAN Food Reference Laboratories, which

coordinate and monitor food-testing activities, support the ASEAN Common Principles of Food

Control System. Finally, the ASEAN Risk Assessment Centre, tasked with risk assessment

activities, recognizes the importance of the ‘risk’ approach for the harmonization of standards.

It is important to recognise that complete harmonization may not be practical or

politically feasible. As such, harmonization of regulations in the subsectors that have high

product coverage of NTMs (cover a large number of products) would make more sense. While

harmonization of standards is often done through benchmarking with international standards,

members also need to realise that improving region-wide regulatory practices may in turn help

members overcome difficulties in adhering to international standards (RSIS, 2013; AFBA,

2012).

The premises for harmonization often build on the elimination of TBTs, having

recognized that these are prominent in the region (AFBA, 2014). Not all NTMs (including TBTs)

are NTBs. As pointed out by Malouche et al. (2013), the onus for policymakers should not be

on the suppression of NTMs, given the legitimacy of these measures. From the Malaysian

perspective, there are only a few recent cases of potential NTBs (not clearly defined NTBs)

related to food products, as reported by other member countries. Table 7.8 presents three

recent cases levelled by Viet Nam, Brunei, and Indonesia against Malaysia. Most of these cases

have been resolved with the member countries.

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Table 7.7. Recent Reported Cases of Non-tariff Measures/Non-tariff Barriers in Malaysia

NTM Reporter Issue Concern Status/ Remarks

Import licensing/SPS/permits and related measures

VNM Malaysia maintains TRQ for live pigs (HS 0103.91000, HS 0103.91000), live poultry (0105.11900, 010594190), pork of various kinds (HS 0203.11000, 0203.21000); poultry meat (0207.11000, 0207.12000, 0207.130000, 0207.14000), milk (0401.10110, 0401.20110, 0401.30110), chicken eggs and duck eggs (0407.00111, 0407.00112, 0407.00910, 0407.00920), round cabbage (0704.90110). While the tariff rate within quotas is from 10–25%, it has high outside quotas, from 20%, 40%, 50%, and 90% respectively. (31/5/2012)

- Agency managing quotas and grant import license is the Animal Health Department. Other cooperating agencies include Ministry of Agriculture and Ministry of Health. (31/05/2012) TRQs are not applicable for ASEAN countries. VNM will revert since it needs to check with its private sector. (1/6/2012) VNM (12/7/2013): VNM considered this case resolved.

Import permit on meat products

BN Export and import meat that pass through Limbang is being subjected to charges by the Malaysian Agriculture Department for import permit at RM0.10 per kg of meat products and RM10 per export permit.

It affects the price of meat products.

MY Comment: Sarawak State Government has agreed to waive the licence/permit fees as specified under the Third Schedule of the Veterinary Public Health Ordinance, 1999 for the import/export of livestock (animal and fish) and livestock products between Brunei and Sarawak, effective 1 March 2012. A letter to that effect has been sent to Brunei. (14/05/12)

Border measures

INDO Malaysia requires imported wheat flour must obtain licence in advance, in accordance with the quota set by Malaysian authorities. (15/2/2012)

ATIGA Article 20 provides that ASEAN member states eliminate TRQs.

MY comment: The import licence or AP is required for monitoring purpose. No quota set for importation of wheat flour. (14/05/12) INDO: request MY to provide the relevant information. (LE/regulations/website) (1/6/2012) MY (12/7/2013): Refer to the information on www.customs.gov.my

ASEAN = Association of Southeast Asian Nations; ATIGA = ASEAN Trade in Goods Agreement; BN = Brunei; HS = Harmonized System, INDO =Indonesia; MY = Malaysia; NTB = non-tariff barrier; NTM = non-tariff measure; SPS = sanitary and phytosanitary; TRQ = tariff rate quota; VNM = Viet Nam. Source: Malaysian International Trade and Industry (2015).

http://www.customs.gov.my/


100

Thus, the focus should shift away from eliminating NTMs to streamlining NTMs across the

region, irrespective of the regulatory rapprochement that is taken; mutual recognition31 or

harmonization. In this respect, given the high frequency of these measures in the food sector,

this chapter contends that the harmonization of standards and regulations should give priority

to the following two areas:

labelling for SPS and TBT reasons; and

restricted substances on food.

Though the above suggestion is based on the frequency of NTMs found in the food sector

from the regulatory framework of Malaysia, AFBA (2014) has also identified the above two

areas (among three others) as priorities for harmonization within ASEAN. It should also be

sector specific as the food sector is highly diversified and trade within the region will

undeniably be concentrated in a few subsectors.

5. Concluding remarks

To move forward in facilitating trade within the region, the food sector should be the

focus of policymakers. The harmonization of standards and regulations in the food sector,

more specifically, would be best done in a piecemeal fashion. First, the focus is to prioritise the

task of harmonization by considering specific NTMs and specific subsectors of food highly

tradable within ASEAN. Second, the focus is to examine which of the NTMs in the highly

tradable sector of the region could impede trade.

References

ASEAN Food and Beverage Alliance (AFBA) (2012), Harmonization of Food Standards in ASEAN: A Shared Vision for Regulatory Convergence. Singapore: ASEAN Food and Beverage Alliance.

ASEAN Food and Beverage Alliance (AFBA) (2014), ASEAN Harmonization in the Food Sector. Singapore: ASEAN Food and Beverage Alliance.http://afba.co/wp-content/uploads/2014/01/AFBA-White-Paper.pdf(accessed 12 October 2015).

Atukorala, P.-C. and S. Jayasuriya (2003), ‘Food Safety Issues, Trade and WTO Rules: A Developing Country Perspective’, The World Economy, Wiley Blackwell, vol. 26(9), pp. 1395-1416.

Buzby, J.C. and L. Unnevehr (2003), ‘Introduction and Overview’, in Jean C. Buzby (ed.), International Trade and Food Safety: Economic Theory and Case Studies, Agricultural

31 Mutual recognition involves the acceptance of different forms of food safety regulation among countries as ‘equivalent’ (Henson and Caswell, 1999).

http://afba.co/wp-content/uploads/2014/01/AFBA-White-Paper.pdf

http://afba.co/wp-content/uploads/2014/01/AFBA-White-Paper.pdf

https://ideas.repec.org/a/bla/worlde/v26y2003i9p1395-1416.html

https://ideas.repec.org/a/bla/worlde/v26y2003i9p1395-1416.html

https://ideas.repec.org/s/bla/worlde.html

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Economic Report No. AER-828. United States Department of Agriculture (USDA) Economic Research Service, 10–27. http://www.ers.usda.gov/publications/aer-agricultural-economic-report/aer828.aspx (accessed 15 October 2015).

Cadot, O., E. Munadi, and L.Y. Ing (2013), ‘Streamlining NTMs in ASEAN: the Way Forward’, ERIA Discussion Paper 2013-24, Jakarta: Economic Research Institute for ASEAN and East Asia.

Henson, S. and J. Caswell (1999), ‘Food Safety Regulation: An Overview of Contemporary Issues’, Food Policy, 24, 589–603.

https://foodindustry.asia/documentdownload.axd?documentresourceid=473(accessed 15 October 2015).

Kasapila, W. and M.D.S. Sharifudin (2011), ‘Harmonisation of Food Labelling Regulations in Southeast Asia: Benefits, Challenges and Implications’, Asia Pacific Journal of Clinical Nutrition, 20(1), 1–8.

Malouche, M., J-D Reyes, and F. Amir (2013), Making Trade Policy More Transparent: Anew Database of Non-tariff Measures, Economic Premise No.123.Washington, DC: World Bank.

Mitchell, L. (2003), ‘Economic Theory and Conceptual Relationships between Food Safety and International Trade’, in Jean C. Buzby (ed.), International Trade and Food Safety: Economic Theory and Case Studies, Agricultural Economic Report No. AER-828.Washington, DC: United States Department of Agriculture Economic Research Service, 10–27. http://www.ers.usda.gov/publications/aer-agricultural-economic-report/aer828.aspx(accessed 15 October 2015).

Norani M.O. (2014), ‘Food Safety in Southeast Asia: Challenges Facing the Region’, Asian Journal of Agriculture and Development, 4(2), 83–92.

Pettman, S. (2013), ‘Standards Harmonisation in ASEAN: Progress, Challenges and Moving Beyond 2015’, ERIA Discussion Paper 2013-30, Jakarta: Economic Research Institute for ASEAN and East Asia.

RSIS (2013), ‘Expert Group Meeting on the ASEAN Economic Community 2015: Opportunities and Challenges for Food Security’, Singapore: Rajaratnam School for International Studies.

Schuster, M. and M. Maertens (2015), ‘The Impact of Private Food Standards on Developing Countries’ Export Performance: An Analysis of Asparagus Firms in Peru’, World Development, Elsevier, vol. 66(C), pp.208-221.

United Nations Conference on Trade and Development (UNCTAD) (2010), Non-tariff Measures: Evidence from Selected Developing Countries and Future Research Agenda. Geneva: United Nations Conference on Trade and Development.

United Nations Conference on Trade and Development (UNCTAD) (2013), Non-tariff Measures to Trade: Economic and Policy Issues for Developing Countries. Geneva: United Nations Conference on Trade and Development.

http://www.ers.usda.gov/publications/aer-agricultural-economic-report/aer828.aspx


https://foodindustry.asia/documentdownload.axd?documentresourceid=473



https://ideas.repec.org/a/eee/wdevel/v66y2015icp208-221.html

https://ideas.repec.org/a/eee/wdevel/v66y2015icp208-221.html

https://ideas.repec.org/s/eee/wdevel.html

https://ideas.repec.org/s/eee/wdevel.html

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CHAPTER 8

Report on Non-tariff Measures in Myanmar

Cho Cho Thein and Zin Zin Naing Yangon University of Economics, Myanmar

1. Introduction

There is a relationship between the reduction of tariffs arising from the World Trade

Organization (WTO) multilateral agreements and numerous regional and bilateral level

preferential trade agreements (PTAs), and the proliferation of non-tariff measures (NTMs).

Efforts to reach a common understanding on the importance of the different types of NTMs and

their impact on trading activities especially in developing countries have been challenging, and

these efforts include those that were initiated in Myanmar.

The most challenging part in the study of NTMs in Myanmar is to be able to fully cover

and review all regulations issued in the country. The second most challenging part is to identify

the affected products in terms of the Harmonized System (HS) code. The preliminary step to

compile the data based on the product groups has been done by the Myanmar team, and the

more precise classification of products in the HS code is accomplished by the United Nations

Conference on Trade and Development (UNCTAD).

2. The legal framework

The collection of data for NTMs requires knowledge on how legislation proceeds in a

country. In Myanmar’s legal system, the ministry having the jurisdiction drafts a legislative bill

that is to be introduced. Based on this first draft of the legislation, consultations take place with

other ministries concerned. The originating ministry that first drafted the legislation then revises

the draft in accordance with the discussion results, advice, and comments from the inter-

ministerial consultations. For NTMs, the Ministry of Commerce may repeat the discussion and

procedure to follow the advice of referral international nongovernment organizations. Once the

required procedure is completed, the draft legislation is sent to the Attorney General for crafting

it into its proper statutory form. The Office of the Attorney General prepares a comment to


104

accompany the draft legislation, which is in turn submitted to the Hluttaw (Parliament) for

further discussion. The draft legislation is also presented to the public through the media, such

as newspapers. To incorporate the public’s comments, the Hluttaw again revises the draft

legislation. If the Hluttaw decides in favour of the legislation, the legislative bill is finalized, goes

to the Office of the President, is signed, and it becomes law.

The sources of information for laws and regulations can be categorized into three. The

Official Gazette is the most common and up-to date source of information on regulations issued

at a point of time. The second source is the database of the Office of the Attorney General,

which provides almost all laws, Cabinet orders, and Cabinet and ministerial ordinances. It is also

supposed to be a comprehensive source of NTM-related regulations. However, the most

comprehensive sources of regulations are the ministries themselves, where specific regulations

affecting their trade activities are lodged.

There are many countries where regulatory functions are scattered over a number of

ministries and agencies, with little incentive to work together and regulations are often adopted

with narrow mandates domestically (Cadot, Munadi, and Ing, 2013). Myanmar is not exceptional

among such countries. The Ministry of Commerce in Myanmar is now leading the effort to make

regulations available in the forthcoming Trade Portal.

Since ASEAN is leading in improving transparency of its trade regulations, this chapter

is a foundation for Myanmar being an ASEAN member to keep improving the transparency of

trade regulations in the region.

3. Study coverage of non-tariff measures in Myanmar

Since no official database is yet available or all the standards referred to in Myanmar’s

legislation, it is difficult to confirm the full coverage of such legislation. For full and complete

information on Myanmar’s NTMs, two stages of collecting regulations were used. The first step

undertaken was a survey of the websites, newspapers, and key informants of all ministries that

were considered likely to issue regulations affecting their particular trade activities. The Ministry

of Commerce was main source of information as it has been the most responsible organization

in Myanmar for collecting trade related-regulations. The second stage was confirming the

collected data with the Ministry of Commerce, where compliance of NTMs is monitored. The

registration of NTMs is finalized by UNCTAD.

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Table 8.1. Coverage of Non-tariff Measures in Myanmar









Table 8.1 reveals the incidence of NTMs in Myanmar in terms of the frequency ratio.

Overall, among the regulations issued and reviewed by mid-2015, 36 regulations were observed

as NTMs and from them, 172 NTMs were coded and registered. Summing all NTMs across the

10-digit HS level, the data reveal a total of 4663 NTM-affected products in Myanmar 47.5

percent of product categories are covered by one or more NTMs.

4. Non-tariff measures by type

Myanmar had 100 percent frequency ratio of by-type NTMs on account of quantitative

restrictions (Ando and Obashi, 2010). Some of these NTMs might have legitimate reasons. Some

NTMs are policy measures concerning security, such as transport of firearms or explosives, or

public health, such as trade in dangerous chemicals and radioactive materials. A number of

NTMs are bans on trade, such as opium and drug narcotics.


106

Figure 8.1. Non-tariff Measures, by Type


The pattern of NTMs in Myanmar is similar to most ASEAN countries where technical

barriers to trade (TBT) and sanitary and phytosanitary (SPS) measures play a significant role in

the incidence of NTMs. Data collection of NTMs in Myanmar reveals that the most widely

regulated measure are SPS measures. The TBT measures are the second most widely used

measures, followed by export-related measures.

0 5 10 15 20 25 30 35 40 45 50

Measures affecting competition

Pre-shipment inspection and other formalities

Non-automatic licensing, quotas, prohibitions andquantity control measures other than SPS or TBT

reasons

Price control measures

Export related measures

Technical barriers to trade TBT)

Sanitary and phytosanitary (SPS) measures

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Table 8.2. Non-tariff Measures, by Type


A Sanitary and phytosanitary (SPS) measures 75 43.6 B Technical barriers to trade (TBT) 41 23.8


D Contingent trade protective measures

E Non-automatic licensing, quotas, prohibitions, and quantity control measures other than SPS or TBT reasons

5 2.9

F Price control measures, including additional taxes and charges

13 7.6

G Finance measures


I Trade-related investment measures


K Restriction on post-sales services




O Rules of origin

P Export-related measures 35 20.3 Total coded NTMs 172 100


There are multiple NTMs on several products. Most of the product groups have total

NTMs exceeding their total number of tariff lines. This indicates that some of the products within

that group are subject to more than one NTM, compared or relative to the number of tariff lines

in each product. As Ando and Obashi observed in 2010, Myanmar was found to cover all product

lines with one or other types of NTMs. Compared to the previous study on Myanmar’s NTMs

(Ando and Obashi, 2010), it is observed from this study that finance control measures, such as

multiple exchange rates and quantity control measures like quotas linked with export

performance and quotas for sensitive product categories no longer exist in Myanmar’s NTMs.

Instead, technical measures such as marking, labelling, and packaging requirements have

become important in Myanmar’s NTM composition. An examination on the frequency of NTMs

by type in Myanmar suggests that TBT measures are the most frequent measures, followed by

SPS and safeguard measures, according to the data in 2014 (Cadot and Ing, 2015). This study

confirms that SPS measures becomes the most regulated NTMs in Myanmar.


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Figure 8.2. Incidence of Multiple Non-tariff Measures, by Product Group


Figure 8.2 confirms the moderate use of NTMs in Myanmar. The chemicals and allied

industries can be seen as the sector covered most by the greatest number of NTMs, but,

only 20 percent of its tariff lines are covered by NTMs, and many of the product groups

in its tariff lines are covered by one NTM only.

Of the total NTM incidence, 14.2 percent are on vegetable products with three or more

NTMs, while almost 11 percent, 10 percent, and 9 percent of NTMs are related to animal

products, foodstuffs, and machinery and electrical products, respectively. It is noted that animal

and animal products, vegetable fat and oil, vegetable extract, and meat and fish are heavily

covered by three or more NTMs (Figure 8.1).

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109

Table 8.3. Number of Tariff Lines subject to Multiple NTMs, by Product Group


Most of the NTMs related to vegetable products are SPS and TBT measures, but export-

related measures such as certification required by the exporting country, export technical

measures, and measures on re-export as well as licensing procedures with no specific ex-ante

criteria are also included. Most of the NTMs related to animals and animal products and food

stuffs are SPS measures such as labelling, marking and packaging requirements, conformity

assessment related to SPS, storage and transport conditions, animal-raising or catching

processes, export-related measures, and licensing for economic reasons as well as customs

inspections, processing, and servicing fees. Regulations related to chemicals and allied

industries’ products contain TBT measures such as testing requirement and traceability

information requirements, export technical measures, as well as licensing for economic reasons.

The NTMs related to textile products can be found in the export and import rules under the

CITES Convention and Operation System. Measures for textile products include TBT, export, and

licensing for economic reasons. For transportation products, there are three NTM regulations

for licensing or permit requirements, authorization requirements for TBT reasons, and licensing

for economic reasons.


01-05 Animal & Animal Products 1 0 527

06-15 Vegetable Products 4 0 727


25-27 Mineral Products 141 0 70

28-38 Chemicals & Allied Industries 441 49 434

39-40 Plastics/Rubbers 63 9 2

41-43 Raw Hides, Skins, Leather, & Furs 20 0 59

44-49 Wood & Wood Products 26 0 151

50-63 Textiles 9 0 131

64-67 Footwear/Headgear 0 0 29

68-71 Stone/Glass 76 0 33

72-83 Metals 171 0 16

84-85 Machinery/Electrical 202 34 106



Total 1,313 207 3,143


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5. Non-tariff measures by issuing institutions

According to the legislative procedure of Myanmar, the NTM-related regulations

reviewed under the study are issued by the ministries concerned. The regulations reviewed in

this study originated from the ministries that are considered as official sources of regulation.

Table 8.4. Non-tariff Measures by Issuing Institutions


NTMs Total Number of

NTMs (%)

1 Ministry of Agriculture and Irrigation 22 13


3 Myanmar Petroleum Product Enterprise, Ministry of Energy

9 5

4 Ministry of Livestock, Fisheries, and Rural Development

85 49

5 Ministry of Forestry and Environmental Conservation

19 11

6 Ministry of Communication and Information Technology

2 1

7 Ministry of Home Affairs 16 9


Total 172 100 Source: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data.

Regulations reviewed in this study are issued by eight different ministries. Most of the

country’s NTMs can be found in regulations issued by the Ministry of Livestock, Fisheries and

Rural Development. The Regulation for Importation and Exportation of Animals and Animal

Products, Animal Health and Development Law, and the Myanmar Marine Fishery Law regulate

many NTMs related to the trade activities of animal and animal products and fishery products.

The Ministry of Agriculture and Irrigation issues regulations provided under the Pesticide Law,

the Plant and Pest Quarantine Law, and the Fertilizer Law, and ranks second in terms of the

number of NTMs issued.

As far as the incidence of NTMs on products in terms of national tariff lines is concerned,

the NTMs issued by the Ministry of Forest and Environmental Conservation have affected the

most products including vegetable products and animals and animal products, which are the

largest group of products affected by more than three NTMs. The Ministry of Forest and

Environmental Conservation is working in collaboration with the Convention on International

Trade on Endangered Species (CITES) by issuing the CITES Convention and Operation system

(2012) regarding the rules of export and import permits for CITES species. In addition to CITES,

the Protection of Wildlife and Conservation of Natural Areas Law (1994) has affected the export

of animal and animal products. The Environmental Conservation Law (2012) has affected

products in many areas including transportation.

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111

Notifications of the Myanmar Petroleum Products Enterprise issued by the Ministry of

Energy contain many TBT measures and licensing for economic reasons. The National Food Law

issued by the Ministry of Health and notifications from the Ministry of Home Affairs also regulate

NTMs. Even though the Ministry of Commerce contributed with only one regulation to the NTM

data of Myanmar, it covers 4405 national tariff lines as its notification is related to the licensing

of many imported products.

Some ministries have drafted laws which are still in the legislation procedure process.

The Ministry of Science and Technology, which is the national enquiry Point for technical barriers

to trade (TBT), is in the process of drafting the law related to TBT. Since it is also the focal ministry

for the responsibility of the Chemical Weapon Convention (CWC) and Myanmar is a member of

CWC, the Ministry is also in the process to notify to the CWC. The Ministry of Science and

Technology enacted the National Standard Law in 2014. However, as it has no rules yet the

Ministry of Science and Technology is taking the leading role for coordinating with the relevant

ministries in order to have the rules in place.

6. Conclusion

Many regulations related to NTMs in Myanmar are ratifications to the international

conventions. To streamline NTMs, different approaches for different types of measures are

required. For technical measures like TBT and SPS, standards harmonization and conformity

assessment improvement are desirable and cost less for compliance. .For NTMs that are

customs related, trade facilitation programmes that include infrastructure development and

computerization should support the regulatory environment.

A regulatory environment with less bureaucracy and less cost of compliance is the

desirable path for Myanmar. However, consumers are increasingly conscious about food safety,

calling for government intervention to ensure they are safe. Myanmar is like other countries

that have resorted to the regulation of foodstuffs and agricultural products. The difficulty is to

assess whether an NTM regulation in favour of consumer protection is truly an NTM and, to

ensure it is not a non-tariff barrier. In conclusion, the transparency of regulations is an

appropriate complement to the level of the comprehensiveness of NTM information, while a

trade policy review mechanism is another solution to minimize the protectionist use of NTMs.


112

References

Ando, M. and A. Obashi (2010), ‘The Pervasiveness of Non-tariff Measures in ASEAN – Evidence from the Inventory Approach’, in M. Micik (ed.), Rising Non-tariff Protectionism and Crisis Recovery. Bangkok: Economic and Social Commission for Asia and the Pacific.

Cadot, O. and L. Y. Ing (2015), ‘Non-tariff Measures: Not All that Bad’, ERIA Policy Brief No. 2015-02, October. Jakarta: Economic Research Institute for ASEAN and East Asia.

Cadot, O., E. Munadi, and L.Y. Ing (2013), ‘Streamlining NTMs in ASEAN: The Way Forward’, ERIA Discussion Paper No. 2013-24. Jakarta: Economic Research Institute for ASEAN and East Asia.

113

CHAPTER 9

An Inventory of Non-tariff Measures in the Philippines

Loreli C. de Dios32 Center for the Advancement of Trade Integration and Facilitation

This chapter describes the work that was undertaken to compile, validate, and register

current non-tariff measures (NTMs) in the Philippines from official sources, with emphasis on

ensuring the comprehensiveness and quality of the information. The inventoried NTMs are then

analysed briefly and policy recommendations are provided to streamline the NTMs and develop

measures that would meet the goals of protecting health and the environment.

1. Context

NTMs, being policy instruments,33are found within a country’s legal and institutional

framework. In the Philippines this framework consists of (i) the Constitution as the basic law of

the land, (ii) Republic Acts or statutes passed by Congress that uphold the spirit of the

Constitution, (iii) executive orders or rules of a general or permanent character executing

statutory power that are issued by the President, and (iv) administrative issuances or rules and

regulations that implement the law and are issued by government agencies authorised by law

to make such rules and regulations, issue licences, and grant rights or privileges.

Organizationally, regulatory agencies have different levels indicating their degree of

autonomy. This reflects their position in the executive branch of government: (i) the Bangko

Sentral ng Pilipinas has the highest status as an independent central monetary authority; (ii) a

department is the primary sectoral subdivision of the executive branch; (iii) ‘attached’ agencies

have a lateral relationship with a department for policy and programme coordination in which

the department has a representative in its governing body but cannot interfere with its internal

operation, attached boards or commissions have regulatory and adjudicatory powers outside

the control of the department; (iv) the next level are regulatory agencies whose personnel and

financial resources are under the administrative supervision of a department; and (v) the last

level are agencies under the control and supervision of a department, for example, line bureaus

32 The assistance of Paul Feliciano is gratefully acknowledged. 33 Defined broadly as measures taken to implement a guiding principle.


114

(Cariño, 2002).All official documents are written in English, being the country’s official language

aside from Filipino. Laws and executive orders take effect when published in the Official Gazette

or newspapers of general circulation.

In the case of administrative issuances, the law – specifically Executive Order No. 292 or

the Administrative Code of 1987—stipulates that copies should be submitted by the issuing

agency to the University of the Philippines Law Center and that rules in force as of 1987 were to

be filed within that year for their sanctions to be enforceable. Issuing agencies are also required

to keep a permanent register of all rules and regulations and make this available to the public.

The University of the Philippines Law Center then set up the Office of National Administrative

Register for discharging its function. Issuances to be filed with the office include (i) statements

of general applicability that implement or interpret a law; (ii) statements of general applicability

that fix and describe the procedures in, or practice requirements of, an agency; (iii) amendments

or repeal of any prior rule; (iv) regulations affecting private rights, privileges, occupation, or

business; and (v) administrative disciplinary action and the governing rules of procedure.

NTMs are thus found mainly in administrative issuances and occasionally in executive

orders. Administrative issuances are generally classified into circulars and orders. Circulars

prescribe policies, rules, and regulations, and procedures that are applicable to entities outside

the government and designed to provide the means for carrying out or supplementing

provisions of the law. Orders are directed to particular offices, officials, or employees on specific

matters. In practice, issuances take various other forms such as memoranda, memorandum

orders, memorandum circulars, and regulations, and except for presidential issuances,34 the

definitions or differences between these forms are not described.

34 EO 292, Book III, Chapter 2 on the ordinance powers of the President: (i) administrative orders are acts that relate to particular aspects of governmental operations in pursuit of his duties as administrative head, (ii) memorandum orders are acts on matters of administrative detail or of subordinate or temporary interest that only concern a particular office or officer, (iii) memorandum circulars are acts on matters relating to internal administration which are being brought to the attention of some offices, for information or compliance, and (iv) general or special orders are acts of the President in his capacity as Commander-in-Chief of the Armed Forces.

Chapter 9

115

2. Methodology

The inventory targeted particular NTM types35 from the NTM classification scheme

(UNCTAD, 2015), covering all relevant issuances as comprehensively as possible.

The approach was to (i) identify official sources of information, (ii) extract the relevant

issuances, (iii) validate the information, (iv) identify the NTMs contained in the issuances and

classify them, and (v) register the information in the template, including NTM type and

products covered.

Official sources were of two kinds – official compilations of regulations or products, and

individual issuing agencies. The former guided the search with the titles or topics of officially

disclosed issuances, while the latter provided the text of these legal documents and other

related issuances. Official compilations took the form of consolidated lists, repositories, or

notifications to international bodies. These were used to draw up a base list of issuances.

The issuances in the base list were examined and also served as a springboard for further

research. For instance, lists of regulated imports only consider the regulation that requires the

import license rather than such prerequisites as the importer or the product registration. Given

that the latter are usually provided in a separate issuance, these had to be sought.

Agency websites were scrutinised in parallel with the above compilations, not only to

obtain digital copies of the legal documents, but also to identify other relevant issuances. The

websites vary widely, from the highly informative and systematic to those with limited or less

orderly information. Agency personnel were contacted directly to request, clarify, or confirm

information. Other online sources were searched for copies of documents that could not be

found in agency websites.

The Official Gazette (www.gov.ph) is the source of Republic Acts, executive orders,

presidential decrees, and other issuances of the President.

3. Analysis of registered non-tariff measures

The results of the inventory are summarised in the following tables. Overall, 295

regulations were evaluated, yielding 854 NTMs.36 Of these, 542 or about 63 percent were

35 These are type A (sanitary and phytosanitary measures or SPS), B (technical barriers to trade or TBT), C (pre-shipment inspection and other formalities), E (non-automatic licensing, quotas, prohibitions, and quantity-control measures other than SPS or TBT), F (price-control measures including additional taxes and charges), G (finance measures), H (measures affecting competition), I (trade-related investment measures), and P (export-related measures). 36 This excludes one anti-dumping measure that was added by the UNCTAD team to the inventory.

http://www.gov.ph/


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notified to the WTO, whether in the Trade Policy Review of 2012, the Import Licensing

Agreement, Application of SPS Measures, or the TBT Agreement.

Table 9.1. Number of Regulations and Non-tariff Measures

Comprehensiveness Indicator Number

Total number of coded regulations 295

Total number of coded NTMs 854

Total number of coded NTMs reported to the WTO 542

Total number of affected products (HS lines) 9,820

Proportion of products affected (%) 100%

Total issuing institutions 37


The Philippines uses the 8-digit ASEAN Harmonized Tariff Nomenclature (AHTN) of

2012,37 which is based on the latest version of the Harmonized Commodity Description and

Coding System (Harmonized System [HS]) of the World Customs Organization and its

amendments. There are a total of 9,820 national HS lines and all are affected by NTMs.

TBTs are the most numerous NTMs, making up 42.1 percent of the total number,

followed by SPS measures, which constitute 27.3 percent (Table 9.2). Export-related measures

are the third major kind, reaching 17.1 percent of the total, although this is also because all

NTMs affecting exports are combined in a single chapter.

37 The World Customs Organization has been undergoing a review of HS 2012 with the proposed changes are to be implemented in 2017, while the AHTN Task Force is aligning the AHTN 2012 with HS 2017 and amending it based on the review criteria. ASEAN member states are to implement the AHTN 2017 by 1 January 2017.

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Table 9.2. Number of Non-tariff Measures by Type and Products Affected

Code NTM Type Number of

NTMs Total NTMs

(%)





56 6.5

F Price control measures including additional taxes and charges

23 2.7



I Trade-related investment measures –

P Export related measures 146 17.1



The frequency of NTMs by subcategory is summarised in Table 9.3. Among the TBTs,

conformity assessment measures are the most common, followed by prohibitions or

restrictions, while the order is reversed for SPS measures although only slightly different in

number. Labelling requirements are the next most frequent imposition under both types.

For export-related measures, licences/quotas/prohibitions make up the majority,

followed by technical measures.

The NTMs were contained in the issuances of 37 government agencies, which are at the

level of the department or attached bureau, authority, commission, administration,

corporation, board, or institute. The top 10 agencies together issued 70 percent of all

regulations, while the top five together made up about 50 percent of all issuances.

Three line bureaus under the Department of Agriculture – the Animal Industry, the Plant

Industry, and Fisheries and Aquatic Resources – issued the largest number equivalent,

respectively, with 14.8 percent, 12.6 percent, and 9.4 percent of the total. SPS measures were

concentrated in these agencies, as well as at the Food and Drug Administration and the National

Meat Inspection Service, given their mandates to protect human and animal health. In contrast,

TBT measures were imposed by several different agencies. About nine NTMs were implemented

simultaneously by multiple agencies.

Environment protection measures were the next major group of NTMs. These came

mainly from the Environmental Management Bureau and the Fertilizer and Pesticides Authority.

Agencies heading the ‘Others’ list had similar objectives, namely the Forest Management Bureau


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and the Department of Environment and Natural Resources (whose issuances were

implemented by the Biodiversity Management Bureau and the Philippine Ozone Desk).

Table 9.3. Frequency of Non-tariff Measures by Subcategory

Code NTM Subcategory Number A1 Prohibitions/restrictions of imports for SPS reasons 88 A2 Tolerance limits for residues and restricted use of substances 1 A3 Labelling, marking, and packaging requirements 28 A4 Hygienic requirements 5

A5 Treatment for elimination of plant and animal pests and disease-causing organisms in the final product 14

A6 Other requirements on production or post-production processes 10 A8 Conformity assessment related to SPS 85 A9 SPS measures, n.e.s. 2 B1 Prohibitions/restrictions of imports for objectives set out in the TBT agreement 113 B2 Tolerance limits for residues and restricted use of substances 8 B3 Labelling, marking, and packaging requirements 56 B4 Production or post-production requirements 26 B6 Product identity requirement 4 B7 Product-quality or -performance requirement 16 B8 Conformity assessment related to TBT 137 C1 Pre-shipment inspection 2 C3 Requirement to pass through a specified port of customs 5

C4 Import-monitoring and surveillance requirements and other automatic licensing measures 3

C9 Other formalities, n.e.s. 14

E1 Non-automatic import-licensing procedures other than authorizations for SPS or TBT reasons 38

E2 Quotas 6 E3 Prohibitions other than for SPS and TBT reasons 9 E6 Tariff-rate quotas 3 F1 Administrative measures affecting customs value 1

F6 Additional taxes and charges levied in connection to services provided by the government 19

F7 Internal taxes and charges levied on imports 3 G1 Advance payment requirement 9 G4 Regulations concerning terms of payment for imports 1 G9 Finance measures, n.e.s. 1 H1 State-trading enterprises, for importing; other selective import channels 1 P1 Export-license, -quota, -prohibitions, and other quantitative restrictions 74 P2 State-trading enterprises, for exporting; other selective export channels 2 P4 Measures on re-export 2 P5 Export taxes and charges 1 P6 Export technical measures 57 P7 Export subsidies 3 P8 Export credits 1 P9 Export measures, n.e.s. 6

Total 854 Source: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data.

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All AHTN product groups are subject to NTMs. In fact, multiple NTMs are imposed on

the majority: 30 out of the 97 AHTN chapters, or about one-third, are covered by 11 to 20 NTM

types, another one-fifth are affected by six to ten NTM types. However, about one-fifth are also

unaffected by NTMs, mainly textiles and footwear.

A counterpart tabulation for the product groups defined in the template shows that 16

out of 27, or 73 percent, are subject to 10–22 NTM types. Only two are affected by one NTM

type, while the rest have between two and nine NTM types imposed on them.

A summary of the specific subcategories of NTMs that affect each of the 97 AHTN

chapters below shows the NTM chapters that apply to broad product groups. Both SPS and TBT

measures are mainly imposed on animals and animal products, vegetable products and

foodstuffs, as well as mineral products (because salt, which is heavily regulated, is classified

here) and chemicals and allied products. The rest are subject to TBT measures.


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Table 9.4. Non-tariff Measures Types affecting Each Product Group

HS Chapter

Product Group NTM Chapter

A B C E F G H P

01-05 Animal &animal products

A1, A3, A4, A5, A6, A8, A9

B1, B3, B8

C1, C3, C4, C9

E1, E3, E6

G1 H1 P1, P6

06-15 Vegetable products A1, A3, A4, A5, A6, A8

B1, B2, B3, B4, B6, B7, B8

C1, C3, C4, C9

E1, E3, E6

F6, F7

G1, G4

H1 P1, P6

16-24 Foodstuffs A1, A3, A6, A8

B1, B3, B4, B6, B7, B8

C1, C4, C9

E1, E2, E6

F1, F6, F7

G1 H1 P1, P6, P9

25-27 Mineral products A1, A3, A5, A6, A8

B1, B2, B3, B4, B7, B8

C1, C9 E1 F6, F7

G1 H1 P1, P6

28-38 Chemicals &allied Industries

A1, A3, A5, A6, A8

B1, B2, B3, B4, B6, B7, B8

C1, C9 E1, E2, E3

F6, F7

G1, G9

H1 P4, P6, P9

39-40 Plastics/rubber A3 B1, B3, B4, B8

C1, C9 E1, E3

F1 G1 H1 P1, P6

41-43 Raw hides, skins, leather, &furs

B3, B4, B8

P6

44-49 Wood &wood products

A1, A8 B1, B3, B8

C1, C3, C9

E1, E3

F6 G1, G9

H1 P1, P5, P6

50-63 Textiles A8 B1, B3, B8

C4 E1, E3

F1 H1 P1, P6

64-67 Footwear/headgear B1, B3, B8

C9 G1 H1

68-71 Stone/glass A8 B1, B3, B4, B8

C9 E1 F7 G1 H1 P1, P2, P6

72-83 Metals B1, B2, B3, B4, B8

C9 E1 F1, F7

G1 H1

84-85 Machinery/electrical A8 B1, B2, B3, B4, B7, B8

C9 E1, E2

F6 G1 H1 P1, P6

86-89 Transportation A8 B1, B3, B7, B8

C9 E1, E3

F1, F6, F7

G1 H1 P1, P6

90-97 Miscellaneous B1, B2, B3, B4, B8

C9 E1, E2, E3

G1 H1 P1, P6, P9


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4. Recommendations

4.1. Streamlining existing regulations

Since our inventory combines information from official compilations and individual

agencies, it is comprehensive in terms of the NTM chapters that have been selected for this

work. Validation by the agency as to (i) possible exclusions, (ii) validity period of all inclusions,

and (iii) specification of products, would constitute further work to make it definitive. While no

major changes in the legal and institutional framework are expected, an annual review of the

inventory is recommended in order to include new or modifying regulations that are expected

to be issued by agencies in the exercise of their authority.

The inventory work also revealed the following:

(a) Publicly available records are incomplete. The quarterly compilation of the official repository

is also non-chronological; its website has been inaccessible in recent months. Regulations do

not indicate their current validity, or specify the amended regulation. Other websites describe

procedures and requirements but do not provide the text of the regulation.

(b) Automated systems of storage or cataloguing do not appear to exist. Older personnel depend

on their own ‘institutional’ memory; newer ones do not have the same familiarity with the

regulations. Physical copies of valid old issuances still have to be digitised; one agency’s manual

can only be obtained by purchase.

(c) The concept of ‘regulated’ products is usually understood in terms of certain types of NTMs

only, such as quotas, prohibitions, or licensing whether or not for SPS and TBT reasons, as most

are not familiar with all other NTMs. Hence, official lists are confined to these types. Yet those

devoted to the same NTM did not contain the same information.

(d) There are measures that are not being enforced, possibly due to their impracticality or cost-

ineffectiveness. The applicability of regulations to domestic products is not always specified.

(e) The language of a number of regulations is unclear or indirect and circuitous, and double or

even multiple negatives are used.

(f) Regulations do not specify the AHTN codes of the products covered. Product descriptions are

too broad or vague. Some are expressed in ‘other than’ terms, or affect products of certain

characteristics only. New or unfamiliar products are not defined.

These indicate the need for an automated repository system that compiles all issuances

from all agencies and provides full information and ease of search and retrieval. The system

could incorporate an NTM classification functionality to enable the identification of the relevant


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provisions in the issuances. The Philippine National Trade Repository38 as a single source of

information on trade-related matters is an initiative in this direction.

Systematisation, however, has maximum positive impact only if the information that is

being systematised is of high quality. For rigour and consistency of regulations, streamlining is

thus imperative. Extraneous or redundant provisions and dead regulations must be removed,

and only the most salient ones must be issued. They must be in plain language, with procedures

or requirements reduced to the barest minimum, while providing all the information in precise

terms. This will lower transactions costs and allow both the agency and the affected party to

focus resources where they count most. Thus it encourages efficiency and compliance.

Streamlining can be done through process reengineering or business process analysis, a

methodology described in the Business Process Analysis Guide to Simplify Trade Procedures

(hereinafter, BPA Guide [UNNExT, UNESCAP, and UNECE, 2012]). Defined as ‘the study of

existing business processes within one or across several entities…. to understand attributes of

the business processes and relationships among them’, the BPA results serve as a baseline for

trade facilitation measures such as the simplification of trade procedures or of documentary

requirements and alignment with international standards, or the automation of trade

transactions and electronic documents for single window systems.

The BPA Guide describes three sequential phases:

Phase I: Scope setting (Step 1. Define project scope. Step 2. Develop detailed work

plan and secure resources)

Phase II: Data collection and process documentation (Step 3. Acquire background

information. Step 4. Conduct interviews and document captured data)

Phase III: Process analysis and recommendations development (Step 5. Analyse the ‘as-

is’ process. Step 6. Develop and propose recommendations)

The Streamlining Non-tariff Measures: A Toolkit for Policy Makers (Cadot et al., 2012)

provides a detailed approach for an NTM review, describing the necessary institutional

conditions, and following the same basic components of data collection and the assessment of

their economic costs and benefits. The toolkit stresses that the streamlining process must be

38 Launched in October 2015 as a web-based single source of comprehensive information on all trade-related matters (http://pntr.gov.ph/about.html), the Philippine National Trade Repository (PNTR) was established by the Ad Hoc Technical Working Group on PNTR under the Committee on ASEAN Economic Community, which is headed by the Bureau of Import Services of the Department of Trade and Industry, with 50 trade regulatory and trade policy agencies as members. It is a commitment under the ASEAN Trade in Goods Agreement that will be linked with the ASEAN Trade Repository, and complies with transparency obligations under the WTO Agreement on Trade Facilitation.

http://pntr.gov.ph/about.html

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analytically sound and balance the reduction of trade costs against the preservation of public

objectives.

An understanding of the business process requires research into related laws and

regulations, forms, and documents, interviews with participants, and onsite observation.

Interview questions39must be thorough and produce insights into the process. The sequence of

activities required to complete a process is mapped with activity diagrams, process descriptions,

and a time-procedure chart. These ‘as-is’ business process models are then verified.

A salient point that must be established by the agency at the start of a BPA is: what is

the objective of the regulation? The inventory shows that aside from the usual mandates

(protecting public health, the environment, consumer welfare, safety, national security, or

morality, or developing particular industries), there are requirements to prove an entity’s

legitimacy, or provide information that would enable control over the goods or entity in case of

non-compliance, or pay fees. These also have to be rationalised.

The business process is then analysed to identify bottlenecks and opportunities for

improvement. Issues to be investigated are the efficiency (caused by redundancies or

unnecessary requirements), effectiveness (amount of rework), reliability, transparency, and

predictability of the business process (UNNExT, UNESCAP, and UNECE, 2012). Diagrams

illustrating ‘to be’ processes may accompany the recommendations, which may include any of

the following: resequencing of activities, elimination of redundant data, documents, procedures

or activities that do not add value to meeting the measure’s objectives, integrating business

processes that have similar objectives, merging procedures to eliminate unnecessary

documents, harmonising data requirements with international standards, and automation and

information sharing. Also possible are the elimination of outdated laws and regulations, the

privatisation of quality control-related tasks, modification or creation of laws and regulations,

and the use of international best practice.

Tasks should not be fragmented, potential bottlenecks must be identified and avoided,

and data that will not be used must not be collected. Timing must also be taken into account.

It is also essential for agencies to have a better understanding of NTM types. Aside from

using simple language, regulations must state explicitly whether they are applicable to imports,

exports, and/or domestic products. And they must specify the AHTN codes of the products

affected. This pre-empts interpretation, misunderstanding, or discretionary decision-making.

39 The BPA Guide provides sample questions in Box 3B-16 on page 43.


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Nine efficient regulation principles of the Organisation for Economic Co-operation and

Development (OECD) are listed in the toolkit (Cadot et al., 2012) to guide the design and

implementation of regulations: (i) transparency and openness, (ii) non-discrimination, (iii)

avoidance of unnecessary trade restrictiveness, (iv) use of performance-based regulation, (v)

use of regulatory impact assessment (RIA), 40 (vi) administrative simplification, (vii) use of

internationally harmonised measures, (viii) ensuring the quality of conformity assessment

procedures, and (ix) incorporation of competition principles in regulatory practice. UNCTAD

(2013) also reiterates the importance of establishing a rule-making process that is transparent

and complies with international obligations.

4.2. Developing NTMs to protect consumer health and the environment

The inventory showed that the bulk of NTMs are imposed to protect health and the

environment. These are legitimate policy objectives. Under the WTO (www.wto.org), members

can adopt NTMs for these objectives, as long as the measures comply with the rule that they do

not create unnecessary obstacles to trade. In the exceptions to the rules, members may also

justify General Agreement on Tariffs and Trade (GATT)-inconsistent measures if these are

necessary to protect human, animal, or plant life or health (Article XX(b)), or relate to the

conservation of exhaustible natural resources (Article XX(g)). To prevent the misuse of trade-

related measures, it further stipulated that an environmental NTM may not be applied in an

arbitrary or unjustifiably discriminatory manner between countries where the same conditions

prevail, or as a disguised restriction on trade.

As Article XX allows the imposition of GATT-inconsistent measures for health or

environment purposes, it also requires proof that a measure is intended to protect human,

animal, or plant life or health, that the measure is necessary, or that it relates to the

conservation of exhaustible natural resources.

Such trade measures must therefore still be developed carefully. Previous analysis of

ASEAN NTMs recommended the following criteria for their rationalisation (i) transparent and

non-discriminatory application, (ii) scientific basis, and (iii) the absence of an alternative that can

40 RIA is best practice to improve the quality of regulations in terms of transparency, rigor, accountability, and consistency, and minimal unnecessary and excessive requirements. The methodology includes cost-benefit analysis and stakeholder consultation to ensure that the regulation is effective and efficient in achieving its policy objectives while minimizing negative effects. RIA was piloted at the Department of Finance, Department of Labor and Employment, and the Department of Tourism in 2012.

http://www.wto.org/

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achieve the objective in a less distortive manner (de Dios, 2004). These may serve as a guide for

their development, complementing the OECD’s efficient regulation principles.

Indeed, the SPS and TBT agreements prescribe a science-based approach for such NTMs

and also encourage adherence to international standards. The agreements impose three types

of discipline: (i) on the process of adoption of the measures and their implementation, under

which NTMs should be designed and implemented in a non-discriminatory manner; (ii) on their

proportionality to the objective sought, under which NTMs should be the least trade-restricting

amongst the available instruments, also known as the efficiency criterion; and (iii) on their

necessity, which implies that no other less trade-inhibiting instrument is appropriate.

Regulations that are more stringent than international standards must be justified based on risk

assessment (UNCTAD, 2013).

References

Cadot, O., M. Malouche, and S. Saez (2012), Streamlining Non-tariff Measures: A Toolkit for Policy Makers. Washington, DC: World Bank.

Cariño, L.V. (2002), ‘Regulatory Governance in the Philippines: A Profile’, Center on Regulation and Competition Working Paper Series, Paper No. 44, Manchester, UK: Institute for Development Policy and Management, University of Manchester.

de Dios, L.C. (2004), Issues and Options for the Work Programme to Eliminate Non-tariff Barriers in AFTA. Jakarta: EU–ASEAN Programme for Regional Integration Support. ASEAN Secretariat.

United Nations Conference on Trade and Development (UNCTAD) (2013), Non-tariff Measures to Trade: Economic and Policy Issues for Developing Countries, Developing Countries in International Trade Studies. Geneva: UNCTAD.

United Nations Conference on Trade and Development (UNCTAD) (2015), International Classification of Non-tariff Measures. Geneva: UNCTAD.

United Nations Network of Experts for Paperless Trade in Asia and the Pacific (UNNExT), United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP), and United Nations Economic Commission for Europe (UNECE) (2009), Business Process Analysis Guide to Simplify Trade Procedures. Bangkok: UNNExT, UNESCAP, and UNECE.

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CHAPTER 10

Non-tariff Measures in Singapore41

Hank Lim Singapore Institute of International Affairs, Singapore

Anika Widiana Center for Inclusive and Sustainable Development, Prasetiya Mulya School of Business and

Economics, Jakarta, Indonesia

Bernard Aw Singapore Institute of International Affairs, Singapore

1. Overview of Singapore

Most small countries lack the resources that larger countries often enjoy, or have

minimal resources. Small size also translates into a small domestic market, which is usually

inadequate to sustain continuous economic growth. In order to overcome these

disadvantages, small countries need to develop a reliance on imports and exports. Singapore is

such a country, with an open economy in which trade is an important growth engine that is

valued at over three times its gross domestic product (GDP).

A heavy reliance on trade is not without risks. Singapore has an exposed and

vulnerable economy, susceptible to external vagaries and shocks. However, small size can be

turned into an advantage. Not only is a smaller country more nimble and easier to manage,

the government is able to manage its scarce resources more efficiently. Singapore is often

admired for its ability to marshal labour resources to attract foreign investments and has

invested significantly in human capital. Furthermore, it has made full use of robust

macroeconomic policies to shape the economy, with an emphasis on growth.

Singapore’s emphasis on growth was borne out of necessity after the country suddenly

found itself a sovereign nation after being ejected from Malaya in August 1965. This forced the

government to cultivate a pro-growth environment. It has put in place pro-business policies

such as strict adherence to the rule of law, strong government institutions, good

41 We would like to acknowledge and thank the support from the Government of Singapore, particularly the assistance and consultation received from the Ministry of Trade and Industry.


128

infrastructure, competitive tax rates, and made significant investments in education, skills

training, and research and development.

As a small nation that depends on imports of food, energy, and raw materials,

Singapore embraces the multilateral trading system embodied by the World Trade

Organization (WTO). A primary aim of Singapore’s trade policy is to safeguard its trading

interests by ensuring free and open international trading conditions. Beyond its support of the

WTO, Singapore advocates continual improvements in trade efforts and strengthening of the

multilateral trade system, in both regional and international contexts.

Since Singapore is so dependent on trade, the government has made exporting and

importing as easy as possible. Singapore is generally a free port. Over 99 percent of all imports

into Singapore are duty free. There are, however, high excise taxes on alcoholic and tobacco

products, as well as motor vehicles and petroleum products. These are mostly levied for social

or environmental reasons. All in all, Singapore maintains one of the most liberal trading

systems in the world.

1.1. The legal framework of Singapore

Singapore is often regarded as a unique and successful case of the progress of an

emerging market into a developed economy. Singapore’s legal system reflects its cultural

diversity and at times turbulent history. As a Commonwealth nation, the legal framework of

Singapore has its roots in English law and practice. However, Singapore has made considerable

amendments to its legal system in the past few decades in favour of local jurisprudence.

Approach to obtain legal comprehensiveness

A primary concern in NTM collection and classification is the legal comprehensiveness

of the country’s laws concerning NTMs. It is critical that an accurate, comprehensive, and

accessible depository of the laws is readily available. While this depository may be available in

printed or digital format or both, it is preferable to have a searchable online database.

Singapore’s acts and regulations are accessible online through Singapore Statutes

Online (SSO) (Attorney-General’s Chambers, 2015). The SSO is the official website for

Singapore’s legislation and is managed by the Legislation Division of the Attorney-General’s

Chambers.

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The SSO carries a comprehensive depository of the following:

a. acts of Parliament and subsidiary legislation;

b. revised editions of acts and subsidiary legislation;

c. bills tabled in Parliament;

d. act supplements, new subsidiary legislation, and amending subsidiary legislation

published each year;

e. historical versions of legislation; and

f. PDF versions of legislation (where available).

The government makes every effort to keep the SSO updated. While it is not known

how often the online depository is updated, the SSO is largely up to date.

Since the legal database comprises not just laws and regulations concerning NTMs, but

also all the other legislation in effect in Singapore, it may be advisable to start collecting

potential NTMs from government agencies identified to be involved in administering this

legislation.

We identified a number of government agencies in Singapore that monitor laws and

regulations potentially related to NTMs. These include the Agri-Food and Veterinary Authority

(http://www.ava.gov.sg/legislation), the Ministry of Trade and Industry

(http://www.mti.gov.sg), the Singapore Customs Authority (http://www.customs.gov.sg), and

the Health Sciences Authority (http://www.hsa.gov.sg), to name a few. Combing through the

websites of these agencies yields acts and regulations that we believe are NTMs.

Another method was to examine Singapore’s notifications to the WTO. It also led us to

compare and assess the information provided in the WTO notifications with that provided in

the United Nations Conference on Trade and Development (UNCTAD) collection. We searched

the WTO website to find notified regulations relating to NTMs, specifically technical barriers to

trade (TBT) and sanitary and phytosanitary (SPS) measures (WTO, 2015a).

Therefore, the NTM collection exercise was carried out using a three-pronged approach:

a. Individual government ministries, departments, and agencies. Visit the websites of

identified government bodies to collect regulations that are indicative of NTMs. For

example, we visited the website of the Agri-Food and Veterinary Authority of

Singapore and combed through their legislation page.

b. WTO notifications. Singapore regularly notifies and reports to the WTO any new

regulations, as well as amendments.

c. Singapore Statutes Online. We complemented the first two search processes with an

examination of Singapore’s legislation to ensure full legal comprehensiveness.

http://www.ava.gov.sg/legislation

http://www.mti.gov.sg/

http://www.customs.gov.sg/

http://www.hsa.gov.sg/


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1.2. WTO notification

Members of the WTO are obliged to file notifications to the Central Registry of

Notifications to ensure transparency in the multilateral trading system. The Uruguay Round

Ministerial Decision on Notification Procedures provided an annex on the indicative list of

notifiable measures (WTO, 2015b).

As a WTO member, Singapore is obliged to notify any new trade-related measures,

including TBT, SPS, import licensing, and quantitative restriction measures to the WTO

pursuant to the notification obligations under the various WTO agreements. Not only does the

notification system help to promote transparency, it also ensures that traders are informed of

upcoming measures so that they adapt in good time, if necessary. Singapore generally notifies

within 1–2 months before a measure is implemented.

For classification of goods, Singapore uses the Harmonized System (HS). While the

international nomenclature developed by the World Customs Organization is set at the 6-digit

level, the HS code of goods in Singapore is an 8-digit code (Singapore Customs, 2015a). This is

because Singapore follows the Association of Southeast Asian Nations (ASEAN) Harmonised

Tariff Nomenclature (AHTN) code – a harmonised 8-digit level code across ASEAN member

countries.

2. Non-tariff measures in Singapore

2.1. Singapore’s NTM regime

Singapore’s NTM regime is non-organized in nature, as reflected in the decentralised

administration and enforcement of NTMs by various government agencies, instead of a

centralised government ministry such as the Ministry of Trade and Industry. As such,

Singapore’s approach to NTM implementation is not based on targeted trade protectionism

but on the need to protect human health and the environment.

The top three institutional sources of NTMs are the Agri-food and Veterinary Agency

(AVA), the Health Sciences Authority, and the National Environmental Agency. These

organizations are responsible for ensuring food safety, national health and safety, and

protecting the environment, respectively. This underscores the non-protectionist stance of

Singapore’s NTM regime.

This decentralised nature makes it difficult for companies to understand the various

NTMs in place. Moreover, NTM rules may be subject to regular change due to new

international standards. However, companies usually do not need to understand the whole

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spectrum of NTMs in order to operate. For example, a food manufacturing company only

needs to know NTMs related to food production. Nonetheless, it could be beneficial for there

to be a centralised depository of information related to Singapore’s NTM regime.

2.2. Data collection

We collected 140 regulations within 58 acts and/or documents indicative of NTMs in

the first phase. The second phase analysed the identified regulations to assess if they affected

products, finding that 115 regulations (from 52 acts) indicative of NTMs had an impact. They

were classified into 529 measures covering 9,558 products (Table 10.1).

Table 10.1. Non-tariff Measure Comprehensiveness in Singapore, 2015

Comprehensiveness Indicator Number

Total NTM-related regulations 115 regulations

Total NTM reported to the WTO 32 regulations

Total number of coded NTMs 529 measures

Total affected products (HS lines, national tariff lines)

a. Total number of affected products 9,558 products

b. Share of the number of affected products to the number of total products (%) 100%

Total issuing institutions 25 institutions


Singapore has adopted the HS-8 digit classification for its national tariff lines and has

9,558 tariff lines. All the products, which is 100 percent national tariff lines, in Singapore are

affected by NTMs. Singapore has reported to the WTO at least 32 regulations covering about

500 NTMs. Our NTM classification yielded 529 coded NTMs, so it is fair to say almost all coded

NTMs have been reported to the WTO.

We also analysed which government agencies issued the largest number of NTMs,

revealing that there were 25 issuing bodies. Table 10.2 lists the top 10 bodies. The AVA issued

the most NTMs, approximately 60 percent of the total measures. The majority of these NTMs

are for products related to foods, feeds, animals, plants, and endangered species, as the AVA is

the government agency responsible for food safety, animal welfare, and plant health. Given

that NTMs are usually introduced in response to concerns over food safety, animal welfare,

sanitary and phytosanitary matters, as well as the environment, and given that the AVA is

responsible for most of these concerns, it has the greatest share of issued NTMs.


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The Health Sciences Authority was a distant second at 7.1 percent, with NTMs covering

product medicines and poisons. The National Environmental Agency was third, with 4.1

percent of total NTMs, covering motor vehicles, air-conditioners, clothes dryers, refrigerators,

and televisions.

Table 10.2. Non-Tariff Measures by Issuing Institution, 2015


NTMs Total Number of NTMs (%)

1 Agri-Food & Veterinary Authority 317 59.9

2 Health Science Authority 38 7.2

3 National Environment Agency 22 4.2


5 Singapore Customs Authority 18 3.4

6 National Environmental Agency, Ministry of the Environment 14 2.6

7 Singapore Armed Forces, Singapore Police Force 11 2.1

8 Singapore Civil Defence Force 10 1.9

9 Minister for Health 8 1.5

10 Ministry of Trade and Industry (MTI), International Enterprise Singapore Board, Customs Authority 8 1.5

11 The rest institutions 65 12.3


Next we looked at the most common types of NTMs implemented. In Table 10.3, 59.2

percent of total NTMs were classified as technical barriers to trade (TBT), particularly for the

products of food, animal, vegetables, medicines, textiles, and machinery. The second-largest

share was attributed to sanitary and phytosanitary (SPS) measures, accounting for 24 percent,

peculiarly imposed on almost all related to food products. Pre-shipment inspection and other

formalities measure only accounted for 0.4 percent.

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Table 10.3. Non-tariff Measures by Type in Singapore, 2015

Code NTM by type Number of NTMs %




E

Non-automatic licensing, quotas, prohibitions, and quantity control measures other than for SPS or TBT reasons 1 0.2



Total coded NTMs 529 100 Source: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data.

Meanwhile, non-technical measures (E+F) imposed on imports coming into Singapore

amounted to 7.0 percent of total NTMs, consisting of non-automatic licensing, quotas,

prohibitions, and quantity control measures (0.2 percent) and price control measures including

additional taxes and charges (6.8 percent). Measures affecting export activities amounted to

9.5 percent. Most export regulations related to NTMs are based on trade agreements between

Singapore and other countries in international conventions, especially for medicines, plant

products, psychotropic substances, chemical substances, tobacco, motor vehicles, live fish,

medical devices, and rough diamonds.

There are 48 types of measures from the NTM classification in Singapore based on

Multi Agency Support Team (MAST) February 2012 classification, consisting of SPS, TBT, pre-

shipment inspection, and other formalities, non-automatic licensing, quotas, prohibitions, and

quantity control measures other than for SPS or TBT reasons, price control measures including

additional taxes and charges, and export-related measures.

Table 10.4 shows the top 10 types of NTMs most frequently imposed on imported and

exported products. B6 measures relating to product identity requirement were the most often

used, accounting for 17.6 percent of total NTMs imposed on imported products. Next was B31

(labelling requirement–TBT) at 13.8 percent, and then B14 (authorisation requirement for TBT

reasons) at 8.1 percent.


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Table 10.4. Top 10 Most Frequent Non-tariff Measures in Singapore, 2015

Number NTM by Type Description Number of NTMs %

1 B6 Product identity requirement 93 17.6

2 B31 Labelling requirement for TBT reasons 73 13.8

3 B14 Authorisation requirement for TBT reasons 43 8.1

4 A31 Labelling requirement for SPS reasons 40 7.6

5 A22 Restricted use in foods and feeds 35 6.6

6 P13 Licensing or permit requirement for export 20 3.8

7 F69 Additional charges, n.e.s. 19 3.6

8 B42 TBT regulations on transport and storage 15 2.8

9 B82 Testing requirement related to TBT 15 2.8

10 F65 Import licence fee 12 2.3 Source: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data.

Export measures most widely used in Singapore were concerned with licensing or

permit requirements for export, accounting for 3.8 percent of total NTMs. Additional charges

and import licence fee measures were also numerous, accounting for 3.6 percent and 2.3

percent, respectively.

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Figure 10.1. Percentage of Non-tariff Measures in Products to Total


As many as 57.9 percent of products were affected by three or more NTMs, while 42.1

percent were affected by two NTMs. Machinery/electrical products were the most affected by

NTMs (more than three NTMs), at 18.8 percent, followed by chemical products (7.7 percent),

and vegetable products (6.5 percent). Most of the products affected by two NTMs were

textiles, at 9.4 percent. No products were affected by just one NTM.

Relationship with other countries

Given its dependency on trade to drive economic growth, Singapore places a high

priority on building relationships with other countries, especially in trade. Singapore

participates in various international conventions and trade agreements within ASEAN, and

with non-ASEAN countries. Outcomes from international conventions, or bilateral agreements,

are passed in Parliament as legislation. Subsequently, the relevant agencies in Singapore issue

acts and regulations.


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The list below shows some international conventions adhered to by Singapore:

a. Montreal Protocol (Ozone depleting products and substances): regulated in the

Environmental Protection and Management Act (Chapter 94A)

b. Chemical Weapons Convention: regulated in the Chemical Weapons (Prohibition) Act

(Chapter 37B)

c. Basel Convention: regulated in the Hazardous Waste (Control of Export, Import and

Transit) Act (Chapter 122A)

d. Rotterdam Convention: regulated in the Poisons Act (Chapter 234) and the Control of

Plants Act (Chapter 57A)

e. Kimberley Process (rough diamonds): regulated in the Regulation of Imports and

Exports Act (Chapter 272A)

f. CITES Convention (endangered species): regulated in the Endangered Species (Import

and Export) Act (Chapter 92A)

g. Several regulations that regulate trade activities between Singapore and other ASEAN

members.

3. Conclusions and development

Conclusions

In Singapore, the trend in NTM policy is consistent with regional countries, where the

majority of NTMs are SPS or TBT in nature. In addition, the focus on food safety and

environmental protection is also aligned with the region.

However, the number of NTMs is not indicative of whether a country has too many or

too few regulations. The fact that ASEAN countries have a number of differences, including

economic structure, export structure, legal framework, and policy effectiveness, means that

they have a varying number of policies, including NTMs. NTMs do not and should not have a

negative connotation as such, although some can be construed as trade barriers.

While Singapore’s trade measures and policies are available on the Internet, they can

be difficult to find. Singapore Customs has anticipated this difficulty in understanding how to

conduct trade in Singapore and has an online guide on its website to facilitate the registration

of trading for interested businesses (Singapore Customs, 2015b).

The reliance on trade to drive Singapore’s economy means that the government tries

to make it as easy as possible for businesses interested in trading with Singapore. Naturally,

NTMs are an important trade issue for Singapore. If appropriate, Singapore strives to take

guidance from best practices, as well as international standards, in the development of its

NTMs.

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In particular, Singapore has an interest in improving the transparency of NTMs in the

region as well as globally, underscoring its commitment to the multilateral trading system. The

Ministry of Trade and Industry has set up an NTM unit to allocate resources to the issues

concerning NTMs. The main objective of the NTM unit, however, is to help Singaporean

companies in addressing NTM issues overseas. This could stem from Singapore’s commitment

to being transparent about its trade policies, as evident from its timely WTO notifications and

publicly assessable information on trade policies and related measures. Important feedback

from Singapore firms is that NTMs and rules are more restrictive and non-transparent in other

ASEAN countries. Therefore, this UNCTAD–ERIA project aims to have more open and

transparent NTM rules in all ASEAN countries.

Furthermore, Singapore is always keen to achieve optimal regulation, avoiding both

over- and under-regulating economic sectors. In 2005, the government formed the Smart

Regulation Committee to improve the knowledge, awareness, and practice of regulations

across the public service. The committee is tasked with finding ways to cut red tape and

achieve optimal regulation.

Overall, we believe the UNCTAD–ERIA project on NTMs will contribute to the

transparency of NTMs in ASEAN, which has been lacking. This is not due to a lack of effort but

an absence of a central and neutral organization to collect and study the information. The

involvement of other ASEAN governments in this project is testament to this. Nonetheless, we

continue to encourage the establishment of more effective cooperation between the various

research teams and their respective national governments.

The value-added of this UNCTAD–ERIA project is to provide a better understanding of

Singapore’s NTMs and a comparative understanding to provide insights on NTM policies of

other ASEAN countries. We believe the project will be a catalyst for further discussion of NTMs

in the ASEAN context. However, we must be careful not to make the purpose of such an

endeavour an exercise in judging the legitimacy or effectiveness of NTMs imposed by ASEAN

countries. Rather, it should be viewed as an opportunity to better understand the NTM

regimes in the region. This will also support the broader goal of global NTM transparency,

which will be the first step to addressing the impact of NTMs on free trade.

Development

While we do not have many specific recommendations for Singapore, the following

would help to build on the momentum of this project.


138

a. Improve understanding of Singapore NTMs.

It is important for the government to disseminate widely and provide an

effective information mechanism on NTM rules.

b. Comparative NTM study and analysis among ASEAN member states.

Important feedback from Singapore firms is that NTMs are more restrictive and

non-transparent in other ASEAN countries. A comparative study of ASEAN

member states may be useful to assess how the NTM regimes in each country

differ. This may foster greater understanding and cooperation between

national governments to improve trade flows and contributes to the

establishment of the ASEAN Economic Community.

c. Focus on studying NTMs by sectors or types of measures (for example, food labelling).

Food safety and environmental protection are two of the most common

reasons identified for the existence of NTMs. Besides looking at NTMs at a

national level, it may be useful to drill deeper into the sectoral level. Clearly,

certain industries such as food manufacturing may be affected more by NTMs

than others.

d. Improve understanding of regional NTMs by promoting more transparency.

The UNCTAD–ERIA project on NTMs is an initiative to promote more

transparency and cooperation between ASEAN governments. This will sustain

efforts to encourage and maintain this climate of improving transparency.

e. Build regulatory cooperation between governments and regulatory bodies.

Continuing efforts to build closer cooperation between governments and

regulatory bodies are important in supporting the broader goal of achieving

NTM transparency.

References

Attorney-General's Chambers (2015), Singapore Statutes Online. Singapore: Government of Singapore. Available at: http://statutes.agc.gov.sg (accessed between Jan–Aug 2015).

Singapore Customs (2015a), Businesses: Harmonized System (HS) Classification of Goods. Singapore: Government of Singapore. Available at: http://www.customs.gov.sg/businesses/harmonized-system-hs-classification-of-goods (accessed 13 November 2015).

Singapore Customs (2015b), Businesses: Quick Guide on Registration Matters. Singapore: Government of Singapore. Available at: http://www.customs.gov.sg/businesses/registering-to-trade/quick-guide-on-registration-matters (accessed 13 November 2015).

http://statutes.agc.gov.sg/

http://www.customs.gov.sg/businesses/harmonized-system-hs-classification-of-goods

http://www.customs.gov.sg/businesses/registering-to-trade/quick-guide-on-registration-matters

http://www.customs.gov.sg/businesses/registering-to-trade/quick-guide-on-registration-matters

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World Trade Organization (WTO) (2015a), TBT Information Management System. Geneva: World Trade Organization. Available at: http://tbtims.wto.org/web/pages/search/notification/BasicSearch.aspx (accessed between Jan–Aug 2015).

World Trade Organization (WTO) (2015b), Decision on Notification Procedures. Geneva: World Trade Organization. Available at: https://www.wto.org/english/docs_e/legal_e/33-dnotf_e.htm (accessed 13 November 2015).

http://tbtims.wto.org/web/pages/search/notification/BasicSearch.aspx

https://www.wto.org/english/docs_e/legal_e/33-dnotf_e.htm

https://www.wto.org/english/docs_e/legal_e/33-dnotf_e.htm

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CHAPTER 11

Non-tariff Measures in Thailand

Chedtha Intaravitak Thailand Development Research Institute

1. Introduction

This chapter is a descriptive analysis of Thailand’s database of non-tariff measures

(NTMs) constructed from January to August 2015 using the United Nations Conference on Trade

and Development (UNCTAD) methodology and NTM classification (UNCTAD, 2012; 2014). This

study evaluates the comprehensiveness of the database by computing proxies for incidence,

depth, and intensity of Thailand’s NTMs. NTMs imposed on some products (at the 8-digit tariff

line level) are explained in detail to highlight their layers and complexity. Policy

recommendations to streamline NTMs in Thailand are briefly mentioned. Section 2 describes an

overview of Thailand’s NTMs, and the comprehensiveness of the database, the types of NTMs

imposed, and regulatory institutions. Section 3 discusses the incidence and depth of NTMs by

product groups. Section 4 analyses the intensity of NTMs for each product group by computing

the average number of NTMs per tariff line. Products with a particularly high average number

of NTMs imposed are emphasized by explaining their NTMs in detail to give perspectives on the

procedures with which importers and exporters have to comply. Section 5 provides brief policy

recommendations and section 6 concludes.

2. Overview of Thailand’s non-tariff measures

2.1. Comprehensiveness of database

Table 11.1 shows a total of 425 regulations coded out of approximately 600 regulations

reviewed. Some regulations are not mandatory, unofficial, or revoked, which, according to

UNCTAD methodology, are not included in the database. The study only counts 250 non-tariff

‘measures42 in force’ reported to the World Trade Organization (WTO); measures ‘in initiation’

to WTO are not included. The study has classified 1,630 NTMs using decentralized methods, that

is, analysing regulations of each regulatory agency at the most disaggregate level starting from

42 NTMs reported to WTO are ‘measures’ and not “regulations’ although some reported measures provide links to regulation sources.


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ministerial notices then moving up to a higher level of regulations such as royal decrees or acts

as necessary. A thorough and careful interpretation of contents and/or clauses in each

regulation results in 9,558 affected products (at the 8-digit national tariff line), which is 98.90

percent of all tariff lines (9,664 lines at 8-digit level). NTMs related to international conventions

are also classified. The study found two D321 (volume-based agricultural special safeguard)

measures in the Thailand–New Zealand and the Thailand–Australia free trade agreements.

These are not reported in this database since NTMs related to foreign trade agreements are

under consideration by related international organizations. A limited number of antidumping

and safeguard measures are included in the database.43 The other types of NTMs that have been

incorporated in the database were those reported to WTO and verified to have been

incorporated in the database. It was considered that reporting the number of ‘regulatory

agencies’ at sub-ministry level is more meaningful than reporting the number of ‘issuing

institutions’ at ministry level44 as the latter is too aggregated to gain a perspective on how

diverse NTM-related government agencies are. An accurate understanding of this issue is crucial

in the design of a right institution to streamline NTMs.

Table 11.1. Comprehensiveness of Database



2 Total number of ‘NTMs’ reported to the WTO (measures in force)

250

3 Total number of coded NTMs 1,630


a. Total number of affected products

a 9,558

b. Share of the number of affected products to the number of total products

b 98.9%

5 Total number of ‘regulatory agencies’ 26 Note: a. A product may be affected by more than one measure, but the same HS-coded product will be counted

as one product, e.g. HS 840731 has three NTMs; it will be counted as ‘one affected product’. b. Thailand adopts the HS-8 digit at national tariff lines and has 9,664 tariff lines. Source: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data.

2.2. Types of non-tariff measures

Table 11.2 shows sanitary and phytosanitary (SPS) measures comprising 48.3 percent

and technical barriers to trade (TBT) comprising 34.9 percent of all NTMs. Price control

43 Type D NTM measure, which includes antidumping, countervailing, and safeguard measures, is not the focus of this data collection. UNCTAD, however, has added some antidumping measures to our database based on antidumping measures reported to WTO.

44 Most regulations classified in this chapter are ministerial notices and are issued by relevant ministries.

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measures (F type) contribute 1.3 percent of NTMs. A detailed inspection of F type measures

indicates applicable ‘special fees’ on some sensitive agricultural products such as F69 (additional

charges, n.e.s.) for import of maize and soybean meal. Other important F measures include, for

example, F65 (import licence fee) for chemical weapons, F72 (excise tax for tobacco and liquor),

F9 (price control measures, n.e.s.) for alcoholic beverages. A detailed inspection of E indicates a

small number of measures with a clear objective of protecting domestic industry. These are

measures aimed at some sensitive agricultural products. Examples include E113 (licensing linked

to local production) for milk (to import milk, importers must buy domestic milk in ratio of 1:2 by

weight), soybean/coconut/palm oil (to control effects on vegetable oil sold in domestic market),

coconut/onion (in the event of shortage, import is allowed within certain limits in quantity and

timeframe). Soybean oil, palm oil, and palm kernel are examples of products that could be

imported only by the public warehouse organization. P measures (export-related measures)

affect almost all tariff lines but, depending on products, the measures range from simple

inspection to registration to licensing/granting permit and to export prohibition.

Table 11.2. Types of Non-tariff Measures Imposed by Thailand

Code NTM by Type Number of

NTMs %

A Sanitary and phytosanitary measures (SPS) 788 48.3%

B Technical barriers to trade (TBT) 562 34.5%

C Pre-shipment inspection and other formalities 44 2.7%

D Contingent trade protective measures 44 2.7%

E Non-automatic licensing, quotas, prohibitions, and quantity control measures other than SPS or TBT reasons 40 2.4%

F Price control measures including additional taxes and charges 21 1.3%

G Finance measures 0%

H Measures affecting competition 3 0.2%

I Trade-related investment measures


K Restrictions on post-sales services




O Rules of origin

P Export-related measures 128 7.8%

Total coded NTMs 1,630 100% Notes: J to O types of NTMs are not collected in this project. Source: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data.


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2.3. Regulatory institutions

Regulatory agencies for NTMs are diverse across different ministries, offices, and

committees (Table 11.3). NTMs regulated by each ministry are, however, not fragmented at

lower level agencies. They are usually grouped in one or two sub-ministry agencies. The Ministry

of Public Health, for example, contributes 42.6 percent of total number of NTMs of which 35.1

percent comes from the Food and Drug Administration alone. The Ministry of Agriculture and

Cooperatives imposes 29.1 percent NTMs of which the Department of Agriculture contributes

25.7 percent. The Ministry of Industry imposes 14.5 percent of which the Thai Industrial

Standard Institute comprise 11.5 percent. The Ministry of Commerce contributes nine percent

of which 6.9 percent comes from the Department of Foreign Trade. This fact, however, should

not obscure the imminent difficulty coordinating these sub-ministry units to streamline NTMs.

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Table 11.3. Non-tariff Measures by Regulatory Institution

Number Regulatory Institution Number of NTMs


1 Ministry of Public Health 697 42.6 1.1 General 116 7.1

1.2 Food and Drug Administration 574 35.1

1.3 Bureau of Pathogens and Animal Toxins Act 7 0.4

2 Ministry of Agriculture and Cooperatives 476 29.1

2.1 General 37 2.3

2.2 Department of Agriculture 420 25.7

2.3 Department of Fisheries 18 1.1

2.4 Department of Livestock Development 1 0.1


3.1 General 2 0.1

3.2 The Thai Industrial Standard Institute 189 11.5

3.3 Department of Industrial Works 31 1.9

3.4 The Office of the Cane and Sugar Board 12 0.7

3.5 Department of Primary Industries and Mines 4 0.2

4 Ministry of Commerce 147 9.0

4.1 General 3 0.2

4.2 Department of Foreign Trade 113 6.9

4.3 Office of the Central Commission on Prices of Goods and Services

26 1.6

4.4 Department of Internal Trade 3 0.2

4.5 Central Bureau of Weights and Measures 1 0.1

4.6 Committee for Grain Trade Act 1 0.1


5.1 Excise Department 15 0.9

6 Ministry of Natural Resources and Environment 10 0.6

6.1 General 4 0.2

6.2 Department of National Parks, Wildlife, and Plant Conservation

6 0.4

7 Office of The National Broadcasting and Telecommunications Commission

7 0.4

8 Prime Minister's Office 3 0.2

8.1 The Consumer Protection Board 3 0.2

9 Ministry of Defense 1 0.1

9.1 Defense Industry Department 1 0.1

10 WTO-related committees 43 2.6

10.1 General 37 2.3

10.2 Committee on Antidumping Practices, Subsidies, and Countervailing Measures

3 0.2

10.3 Committee on Safeguard Measures 3 0.2

Total 1,637 100% Notes: NTMs under the regulatory institution ‘General’ means are those issued by ministries but with no lower level units indicated as responsible such as departments and bureaus. They are issued usually by the secretariat of the relevant ministry. The 1,637 NTMs exceed what was previously reported (1,630) because seven of the measures reported here are regulated by both the Department of Agriculture and the Department of Industrial Works. Source: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data.


146

3. Incidence and depth of non-tariff measures

The incidence of NTMs is defined as a proportion of tariff lines in each product group (to

be defined later) affected by at least one NTM. The depth of NTMs is defined as a proportion of

tariff lines in each product group affected by three or more NTMs. Table 11.4 shows the division

of products into groups according to their HS code at the 2-digit level.

Table 11.4. Product Groups Classified by Harmonized System Code (2-digit Level)

HS Code Product Group

01-05 Animal and animal products

06-15 Vegetable products

16-24 Foodstuffs

25-27 Mineral products

28-38 Chemicals and allied industries

39-40 Plastics/rubbers

41-43 Raw hides, skins, leather, and furs

44-49 Wood and wood products

50-63 Textiles

64-67 Footwear/headgear

68-71 Stone/glass

72-83 Metals

84-85 Machinery/electrical

86-89 Transportation

90-99 Miscellaneous Source: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data.

Figure 11.1 shows machinery products comprise 21.4 percent of tariff lines affected by

one or more NTMs. Seventeen percent of these products has only one NTM. Textiles and metals

products comprise 11.2 percent and 9.4 percent, respectively, with the majority of products for

each group having one NTM. Chemical products comprise 12 percent with approximately equal

share of products affected by one and three or more NTMs. Not surprisingly, animal products,

vegetables products, and foodstuff have the majority of their products affected by three or more

NTMs. The ‘depth’ of NTMs for these product groups is anticipated due to the complexity and

details of SPS and TBT measures.

A major drawback of an analysis based on Figure 11.1 is that the percentage is computed

as a percentage of total number of tariff lines (9,664 lines). A more interesting representation

would use the number of tariff lines affected by one or more NTMs in each product group

divided by the number of tariff lines in each product group (Figure 11.2).

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All tariff lines in all product groups except vegetable products and foodstuffs are

affected by at least one NTM. This is a striking result compared to previous literature on

Thailand’s NTMs. Cadot et al. (2015), using the ASEAN Secretariat 2009 database, found the

highest incidence of NTMs in textiles where approximately 23 percent of tariff lines are affected

by one or more NTMs (Figure 11.3). The major reason for this discrepancy is the different

methods of NTM collection. The ASEAN Secretariat database is based on reports by government

officials whereas this database is collected by first-hand analysis of actual regulations and done

by independent researchers. The methodologies in classifying NTMs of the two databases may

also differ.

Figure 11.1. Incidence and Depth of Non-tariff Measures (as Percentage of 9,664 Tariff Lines)


According to this new database, it can be concluded that Thailand has 100 percent

incidence of NTMs in all product groups except vegetable products and foodstuffs with 90.8

percent and 91.3 percent, respectively. Figure 11.2 highlights the depth of NTMs for animal

products, vegetable products, foodstuffs, and mineral products where the majority of tariff lines

have three or more NTMs.


148

Figure 11.2. Incidence and Depth of Non-tariff Measures (as Percentage of the Number of Tariff

Lines in Each Product Group)


Figure 11.3. Incidence and Depth of Non-tariff Measures: Percentage of Tariff Lines Affecting One or

More Non-tariff Measure (Previous Study)

Source: Cadot et al. (2015).

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.03 NTMs 2 NTMs 1 NTM

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4. Intensity of non-tariff measures

The intensity of NTMs is defined as the average number of NTMs per tariff line for each

product group. The average number of measures for each tariff line is further classified into

average number of measures of A, B, C, D, E, F, H, and P types. The overall average number of

NTMs per tariff line for Thailand is 6.4 (Figure 11.4). Animal products, vegetable products, and

foodstuffs have the highest intensity of NTMs, where the average numbers of NTMs per tariff

line is 21.4, 22.7, and 24.6, respectively. Most measures for these product groups fall under SPS

and TBT categories. Mineral products, chemicals, and transportation products have, on average,

from three to five measures per tariff line with B and P types having the most. Other product

groups have less than three average NTMs per tariff line. Figure 11.4 presents a very different

result from previous work on Thailand’s NTMs. Intaravitak et al. (2013), also using the ASEAN

Secretariat 2009 database, found the average number of NTMs to be less than one per tariff line

for all product groups.

Figure 11.4. Intensity of Non-tariff Measures: Average Number of Non-tariff Measures per Tariff Line

for Each Product Group



150

The analysis based on Figure 11.4 may underestimate the severity of NTMs. Each NTM

type tends to be particularly associated with some types of products. For example, SPS measures

in general are applicable to vegetable/animal products and foodstuffs. Many TBT measures

concerning product performance/quality are particularly applicable to metal and machinery

products. For this reason, the study has computed for each product group, an average number

of measures of each NTM type among those tariff lines affected by that particular NTM type

(Figure 11.5).

Within the animal products group, certain tariff lines are affected by type A NTMs. The

average number of type A NTMs imposed on these products is 17.6. Using the same logic within

animal products group, certain tariff lines are affected by type B NTMs. The average number of

type B NTMs imposed on these products is 4.1.

Using this method to compute the intensity (or severity) of NTMs is more precise than

that used in Figure 11.4. As an example, according to Figure 11.4, mineral products have, on

average, 3.9 NTMs per tariff line with insignificant proportion of type A NTMs. Figure 11.5, on

the other hand, suggests that for tariff lines in mineral products group affected by type A NTMs,

the average number of type A measures is 22.3 per tariff line. For example, HS 25010010 (salt,

including table salt and denatured salt; and pure sodium chloride) contains type A measures

ranging from tolerance limit of contaminations to hygienic practice during production to

packing, storage, and labelling requirements. Similarly, it is striking to note that the average

number of type A NTMs faced by tariff lines affected by type A NTMs in animal products,

vegetable products, and foodstuffs groups are 17.6, 18.5, and 19.3, respectively. For textile

products, tariff lines affected by type B NTMs have 4.5 average measures, mostly to ensure that

imported fibre waste is properly reported and managed. Metal products facing type B measures

(product quality or performance requirements) have to comply with 5.5 measures on average.

Metal products facing type D measures have to comply with 6.5 measures on average. Most are

AD measures. Similarly, machinery products facing type B measures (product quality or

performance requirements) have to comply with 6.9 measures on average.

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Figure 11.5. Intensity of Non-tariff Measures: Average Number of Measures of each NTM Type

Among Tariff Lines Affected by that Particular NTM Type


152


5. Policy recommendations on streamlining non-tariff measures

The focus of this chapter is a descriptive analysis of Thailand’s NTM database and not so

much on designing policies to streamline NTMs. This section briefly discusses ideas about how

to address NTM issues learned during NTM data collection, generally concurring with the

methods proposed by the World Bank toolkit on streamlining NTMs (Cadot et al., 2012). This

approach, however, should be modified to suit local context in each country. In particular, this

study proposes the following steps to streamline NTMs:

NTM collection. Establish a one-stop NTM service centre where importers and exporters can

report and be notified of NTMs in a timely manner.

Review of NTMs. The cost-benefit of an NTM should be carefully analysed. Equally important

is understanding who benefits and who bears the cost. Sometimes, NTMs represent

economic rents for some third parties, causing unnecessary inefficiency.

Streamlining NTMs. The following are proposed:

Establish a strong independent oversight body.

Focus on regional mutual recognition agreements as an intermediate, short-to-

medium term solution.

Encourage adoption of international standards in place of national and/or regional

standards.

6. Conclusion

This study constructed a relatively comprehensive Thailand database of NTMs by

analysing official regulations using UNCTAD methodology and have classified 1,630 NTMs from

425 regulations. These NTMs affect 9,558 products at 8-digit national tariff lines, which is 98.90

percent of all tariff lines (9,664 lines at 8-digit level). Of these NTMs, 83 percent are SPS and TBT

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153

measures that affect 55 percent of tariff lines. The study found limited use of price control

measures (F type) although it affects a relatively large number of tariff lines. Type E measures,

especially those with a clear objective of protecting domestic industry such as E113 (licensing

linked with local production), are barely used. This study also found limited use of the H11 (state-

trading enterprise, for importing) measure. P measures (export-related measures) affect almost

all tariff lines but, depending on products, the measures range from simple inspection to

registration to licensing/permit and to export prohibition. NTM-related regulatory institutions

are diverse as they are from different ministries. However, NTMs tend to ‘group together’ in

some of these sub-ministry agencies. The database indicates that Thailand has 100 percent

incidence of NTMs in all product groups except vegetable products with a 90.8 percent

incidence and foodstuffs with a 91.3 percent incidence. Animal products, vegetable products,

foodstuffs, and mineral products feature more ‘depth’ of NTMs since the majority of tariff lines

in these product groups face three or more NTMs. For each product group, this study devised a

new method to proxy the intensity (or severity) of NTMs by computing an average number of

measures of each NTM type among tariff lines affected by a particular NTM type. The study

found significant NTM severity for some NTM types in some products. For example, for those

tariff lines in the mineral products group affected by type A NTM, the average number of type

A measures is 22.3 per tariff line. Similarly, the average number of type A NTMs faced by tariff

lines affected by type A NTMs in animal products is 17.6; vegetable products 18.5, and foodstuffs

19.3.

References

Cadot, O., M. Malouche, and S. Saez (2012), Streamlining Non-tariff Measures: A Toolkit for Policy Makers. Washington, DC: World Bank.

Cadot, O., E. Munadi, and L.Y. Ing (2015), ‘Streamlining NTMs in ASEAN: The Way Forward’, Asian Economic Papers, 14(1), pp.35–70.

Intaravitak, C., N. Luksanapanyakul, and S. Tunmunthong (2013), ‘NTMs of Thailand Trade Partners in ASEAN’, in Thailand Development Research Institute (ed.), Increasing the Competitiveness of Thai Manufacturing Industries under the New International Economic Environment (Phase 4). A Research Project Funded by the Office of Industrial Economics, Ministry of Industry, Thailand. Bangkok: Thailand Development Research Institute, 165–194.

United Nations Conference on Trade and Development (UNCTAD) (2012), Classification of Non-tariff Measures: February 2012. Geneva, Switzerland: UNCTAD.

United Nations Conference on Trade and Development (UNCTAD) (2014), Guidelines to Collect Data on Official Non-tariff Measures: September 2014. Geneva, Switzerland: UNCTAD.


154

155

CHAPTER 12

Non-tariff Measures in Viet Nam45

Vo Tri Thanh46

Central Institute for Economic Management, Viet Nam

Nguyen Anh Duong

Central Institute for Economic Management, Viet Nam

Tran Binh Minh Central Institute for Economic Management, Viet Nam

1. Introduction

Viet Nam has embarked on comprehensive reforms since 1986, focusing on three pillars:

(i) macroeconomic stabilization, (ii) market-oriented reforms, and (iii) pro-active economic

integration. Since 2000, the economic integration process has accelerated.

Alongside increasing integration, Viet Nam has also phased out tariff barriers to trade,

with import tariffs reduced under most integration arrangements. Under the World Trade

Organization (WTO), average bound tariffs dropped sharply, from 17.4 percent in 2005 to 14.2

percent in 2007 and are set to remain stable at 13.4 percent until 2023. This is also the highest

level of bound tariff rates for Viet Nam. Tariffs fell most sharply under the Association of

Southeast Asian Nations (ASEAN) Free Trade Area (AFTA) framework, with the bound rate

decreasing from 6.7 percent in 2005 to below 2.8 percent in 2007 and set to fall to 2.5 percent

in 2023. Reduction of bound tariff rates was more gradual under the ASEAN–China FTA (ACFTA),

the ASEAN–Korea FTA (AKFTA), and the ASEAN–Japan Comprehensive Economic Partnership

(AJCEP), though the pace of reduction has been faster since 2015.

45 This research was conducted as a part of the project of the Economic Research Institute for ASEAN and East Asia (ERIA) and the United Nations Conference on Trade and Development (UNCTAD) ‘NTMs in ASEAN’. The authors would like to express appreciation to both ERIA and UNCTAD for constructive guidance and thoughts. The authors are deeply indebted to the members of this project for their invaluable suggestions. The opinions expressed in this paper are the sole responsibility of the authors and do not reflect the views of ERIA or UNCTAD or the Central Institute for Economic Management. 46 Lead author. Vo Tri Thanh: [email protected] / [email protected]. Address: 68 Phan Dinh Phung Street, Ba Dinh District, Hanoi, Viet Nam.

mailto:[email protected]

mailto:[email protected]


156

Figure 12.1: Signed and Pending Free Trade Agreements of Viet Nam

Note: ASEAN = Association of Southeast Asian Nations; EFTA = European Free Trade Association; EU = European Union; FTA = free trade agreement; RCEP = Regional Comprehensive Economic Partnership; TPP = Trans-Pacific Partnership. Source: Central Institute for Economic Management (2015).

Figure 12.2: Tariff Reductions under Some Free Trade Agreements, Viet Nam

Note: FTA = free trade agreement; MFN = most-favoured-nation tariff (for all WTO members); ACFTA = ASEAN–China FTA; AKFTA = ASEAN–Korea FTA; AJCEP = ASEAN–Japan Comprehensive Economic Partnership; AFTA = ASEAN Free Trade Area. Source: Truong et al. (2011).

As tariffs are gradually phased out, non-tariff measures are attracting more and more

attention, alongside other issues such as trade facilitation and reducing unnecessary burdens

p

e

r

c

e

n

t

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on business. This is because non-tariff measures (NTMs), given their incorporation into various

regulations and policies that have implication for flows of goods both at-the-border and behind-

the-border, may still restrict trade flows into Viet Nam from other countries. In turn, consumers

may not be able to consume their preferred products from overseas and importers may face

higher compliance costs when importing intermediate products for further processing in Viet

Nam. Conversely, the presence of NTMs may also serve specific purposes that can be justified,

such as protection of domestic consumers’ health and local biodiversity.

NTMs are defined as ‘policy measures, other than ordinary customs tariffs, that can

potentially have an economic effect on international trade in goods, changing quantities traded,

or prices or both’ (UNCTAD, 2012). The definition of NTMs is thus quite broad. Unlike NTMs,

non-tariff barriers (NTBs) refer to restrictions that ‘…result from prohibitions, conditions, or

specific market requirements that make importation or exportation of products difficult and/or

costly’ (Nguyen and Dang, 2014). NTBs arise from different measures taken by governments and

authorities in the form of government laws, regulations, policies, conditions, restrictions or

specific requirements, and private sector business practices, or prohibitions that protect the

domestic industries from foreign competition. Thus, NTBs constitute a subset of NTMs and the

a priori distinction of NTBs from NTMs should be avoided.

This chapter revisits NTMs in Viet Nam, focusing exclusively on the types of NTMs that

originate from Vietnamese regulations and policies. Such NTMs may have implications for

imports of goods into Viet Nam, as well as for exports of goods by Vietnamese exporters. Hence,

we ignore the possible NTMs in overseas markets that Vietnamese exporters may face when

selling their products. As we focus only on the types of NTMs that are in force, we leave aside

the possible trade effects of such NTMs.

Being an economy in transition from a central planning regime to a market mechanism

during the past three decades, Viet Nam has only had relatively limited experience with

instruments of trade and trade-related policies. Most of this experience can be summarized with

the use of three types of instruments: (i) trading rights, (ii) non-tariff barriers, and (iii) trade-

related investment measures. More recently it has also included prohibitions and/or

restrictions of trade of selected products due to Viet Nam’s participation in various

international conventions.

The remainder of this chapter is structured as follows. Section 2 summarizes the key

aspects of NTMs in Viet Nam. Section 3 draws out some key lessons from identifying NTMs in


158

Viet Nam. Finally, section 4 makes some recommendations related to identifying and

stocktaking NTMs in Viet Nam.

2. Key findings of non-tariff measures in Viet Nam

2.1. Classification of identified non-tariff measures by type

Table 12.1 describes the comprehensiveness of the NTM database for Viet Nam.

Accordingly, all products at the 8-digit HS level are subject to some NTMs. The NTMs were

sourced from 121 regulations, and just over one-third were actually in the WTO database.

Table 12.1. Comprehensiveness of Database

HS = Harmonized System; NTM = non-tariff measure; WTO = World Trade Organization. Note: a. A product may be affected by more than one measure, but the same HS-coded product will be counted

as one product, e.g., HS 840731 has three NTMs; it will be counted as ‘one affected product’. b. Viet Nam adopts the HS-8 digit at national tariff lines and has 9558 tariff lines. Source: Authors’ calculation based on the newly constructed 2015 NTM database ASEAN-ERIA-UNCTAD raw data.

Table 12.2 presents the documented NTMs by type. Viet Nam has completed

phasing out all trade-related investment measures to attract foreign investment.

Accordingly, there is no documented NTM under Chapter I – Trade-related investment

measures (as per the UNCTAD classification). The NTMs under Chapters K to O are excluded

from the analysis, so they are not documented in Table 12.2.

As can be seen, sanitary and phytosanitary (SPS) measures and technical barriers to

trade (TBT) constitute the most popular NTMs in Viet Nam. Each of these codes accounted

for almost 37.5 percent of NTMs that were identified in the process. Altogether, SPS and

TBT measures already make up three quarters of NTMs in Viet Nam; export-related

measures rank third with 63 measures (or 16.6 percent).



2 Total number of NTMs reported to the WTO

(measures in force)

142



a. Total number of affected products

a 9,558

b. Share of the number of affected products to the number of total products

b 100%

5 Total number of ‘regulatory agencies’ 15

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159

Table 12.2. Summary of Non-tariff Measures by Type






9 2.4

F Price control measures including additional taxes and charges

7 1.8





Total 379 100


SPS measures account for 37.5 per cent of the coded NTMs. The most popular ones are

authorization, testing, and certification. Once authorized, the relevant ministry will issue a

document listing the products and/or breeds authorized for import and use in Viet Nam, which

makes it easy to misunderstand that the NTM works under a positive-list approach. The reviews

also show that there are frequent changes in the SPS regulations of the responsible ministries

(in fact, some regulations received critical feedback from business and had to be

amended/delayed, such as the ice-glazing ratio on fishery products).


160

2.2. Classification of non-tariff measures by issuing agency

Table 12.3 tabulates the number and share of NTMs by issuing agency.

Table 12.3. Summary of Non-tariff Measures by Issuing Agency

Issuing agency Number of NTMs %

Ministry of Industry and Trade 32 8.4

Ministry of Transport 8 2.1

Ministry of Science and Technology 4 1.1

Ministry of Agriculture and Rural Development 130 34.2

Ministry of Finance 16 4.2

Ministry of Natural Resources and Environment 2 0.5

Ministry of Information and Communication 4 1.1

Ministry of Construction 6 1.6

Ministry of Health 63 16.6

Government 70 18.5

National Assembly 25 6.6

General Department of Customs 1 0.3

General Department of Quality Measures 2 0.5

Prime Minister 1 0.3

Standing Committee of National Assembly 15 4.0

Total 379 100


Table 12.4 goes into greater detail by summarizing the number and share of SPS, TBT,

and export-related measures by issuing agency.

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161

Table 12.4. Classification of Sanitary and Phytosanitary, Technical Barriers to Trade, and Export-related Measures by Issuing Agency

SPS TBT Export-related Measures

Number Share (%) Number Share (%) Number Share (%)

Ministry of Industry and Trade

8 5.6 11 7.7 4 6.3

Ministry of Transport 0 0.0 8 5.6 0 0.0

Ministry of Science and Technology

0 0.0 3 2.1 0 0.0

Ministry of Agriculture and Rural Development

66 46.5 31 21.8 32 50.8

Ministry of Finance 0 0.0 4 2.8 5 7.9

Ministry of Information and Communication

0 0.0 3 2.1 1 1.6

Ministry of Construction 0 0.0 5 3.5 0 0.0

Ministry of Health 30 21.1 30 21.1 1 1.6

Government 16 11.3 31 21.8 15 23.8

National Assembly 11 7.7 13 9.2 1 1.6

General Department of Quality Measures

0 0.0 2 1.4 0 0.0

Prime Minister 0 0.0 1 0.7 0 0.0

Standing Committee of National Assembly

11 7.7 0 0.0 4 6.3

Total 142 100 142 100 63 100


2.3. Products affected by non-tariff measures

Another aspect of NTMs that deserves attention is the scope of affected products. One

way to do so is to calculate the number of NTMs applied in each product code/category. The

proportion of NTM-affected products is calculated at the 8-digit Harmonized System (HS) level.

Following that principle, Figure 12.3 summarizes the proportion of products at the 8-digit HS

level that are subject to (i) fewer than 10 NTMs, (ii) between 10 and 19 NTMs (inclusive), and

(iii) at least 20 NTMs. As a note, the NTM is identified at the highest disaggregated level, rather

than at the chapter level (that is, A, B, C, and so on).


162

Figure 12.3. Summary of Number of Non-tariff Measures by Product Group (%)


It should be noted that no products in Viet Nam are free of NTMs. In fact, there are two

NTMs that apply horizontally to all products. First, under Circular 28/2012/TT–BCT issued by the

Ministry of Industry and Trade, traders with no presence in Viet Nam have to register rights to

imports. This regulation affects all products. Second, following Decision 10/2010/QD–TTg of the

Prime Minister, importers are required to obtain a Certificate of Free Sale (CFS) from the

relevant authority of the exporting country for their products. Underlying this requirement is

the need to ensure that imported products are eligible for free sale in Viet Nam. If the goods

and products were to be exported to Viet Nam, the requirements under Chapter 3 (CFS

requirements for products and goods imported into Viet Nam) are such that businesses that

import the products and goods listed under the regulations should duly submit CFS to the

Vietnamese competent authority (Article 17). However, if the competent authority so requires,

the aforesaid CFS issued by the exporting country or region should undergo ‘consular

legalization’ at the Vietnamese consulate or embassy in the exporting country, except where it

is exempted pursuant to international pacts of which Viet Nam is a member nation or where it

concerns the goods of exporting countries that have signed a mutual waiver of consular

requirements with Viet Nam.

0

5

10

15

20

25

Fewer than 10 NTMs From 10 to 19 NTMs At least 20 NTMs

Chapter 12

163

One should recall that a sizeable portion of NTMs in Viet Nam is applied to export

products. Notable examples of such products are fishery and agricultural products. In many

cases, the NTMs are applied on a voluntary basis, not because of a request by partners. There

are several reasons to this. First, Viet Nam has to comply with commitments under international

conventions (for example, prohibitions, conditional exports, among others). Second, Viet Nam

applies voluntary export measures to ensure quality control of exported products.

Similar to Figure 12.3, Figure 12.4 depicts the prevalence of export-related measures

across products at the 8-digit HS level that are subject to (i) one measure, (ii) two measures, and

(iii) at least three measures. Again, the export-related measures are identified at the highest

disaggregated level, rather than at the chapter level (i.e. A, B, C, etc.). Moreover, the share is

calculated based on the number of 8-digit HS products that are subject to export-related

measures (rather than all 8-digit HS products). As can be seen, exports of machinery and

mechanical products are all subject to only one NTM. A large share of products under chemical

and allied industries, foodstuffs, and wood products are subject to only one export-related

measure, and export of vegetable products and animal-animal products are largely subject to at

least three NTMs.

Figure 12.4. Summary of Export-related Measures by Product Group (%)


0

5

10

15

20

25

1 NTM 2 NTMs At least 3 NTMs


164

2.4. Objectives of non-tariff measures

There have been no clearly indicated reasons for the NTMs. Table 12.5 shows that

almost 99 percent of NTMs are not accompanied by a specific objective. Only a couple of NTMs

serve the explicit objective of protecting human life and health, and another two aim to protect

the life and health of plants. In some cases, one can infer the objectives of NTMs, such as

whether they seek to enhance food safety, protection of domestic industries (though the effect

is not clear), and the quality control of imported products as they will at a later stage become

inputs for export-oriented processing industries. Nonetheless, the ambiguity of NTM objectives

casts doubt on the systematic use of such measures in trade.

Table 12.5. Reasons Cited for Non-tariff Measures

Measure Objective Number of NTMs %

No objective specified 375 98.9

Protection of human life and health 2 0.5

Protection of life and health of plants 2 0.5


2.5. Countries affected by non-tariff measures

From the identification of NTMs, it emerged that 368 measures (or 97.1 percent of

NTMs) applied to trade with all countries/territories. Only a few measures affected a group of

countries/territories. The most notable measures are those pertaining to the trade of rough

diamonds under the Kimberley process. In another instance, Viet Nam has a specific measure to

control the quality of fishery exports to Japan. Viet Nam has not made use of NTMs on an MFN

or discriminatory basis.

TBT measures are popular for the remaining products. Again, a significant proportion of

the NTMs are with permits, testing, and authorization. Full prohibition also applies for some

selected products, such as dangerous goods, chemical products, or arms. Unlike SPS measures,

TBT can be found in regulations of a wide range of agencies, such as the Ministry of Industry and

Trade, the Ministry of Agriculture and Rural Development, the Ministry of Information and

Communication, and the Ministry of Transport. TBT mainly affects consumer products, motor

vehicles, and dangerous goods. This is mainly because they aim to protect domestic industries

and ensure quality control for the benefit of consumers.

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165

3. Key lessons

From the identification of NTMs in Viet Nam some key lessons emerge. First, Viet Nam

needs to frequently monitor the regulations that may have NTM implications. This is because

documents are frequently amended, replaced, or nullified in the country (Figure 12.5). The issue

is hard to avoid, as Viet Nam continues to improve its legal framework and internalizes its

commitments under international conventions and/or free trade agreements (FTAs). The online

database can help with this process: new regulations will be promptly published in the indicated

sources for data collection. In most cases, it takes 4–5 working days for new regulations to be

posted online (from their date of publication). Still, all the current laws governing trade remain

in effect and, notwithstanding a few comments/suggestions for partial revision, a major change

in the legal system governing trade is not expected in 2016.

Figure 12.5. Number of Issued Documents, 2010–2014

PM = Prime Minister. Source: Government of Viet Nam Portal. http://chinhphu.vn

Second, there should be greater investigation into the trade effects of NTMs, for several

reasons. On the one hand, the measures tend to apply to all countries and territories, but only

some have current trade transactions with Viet Nam. On the other hand, the measures apply to

broad product categories, whereas only a few HS products in such categories are actually

affected. Of course, it may be argued that the absence of trade transactions for some products

and/or with some countries actually resulted from the impact of NTMs. Still, in this regard,

analysing the trade effects of NTMs attains even greater importance.

19

117

1162

620

3266

8124 162

746

3923

23

106

52

619

3424

19210

78

582

3072

29 125 75

496

3930

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

luật Nghị định QĐ.TTg thông tư Vb điều hành

2010 2011 2012 2013 2014

Law Decree PM’s Decision Circular Other policy documents

http://chinhphu.vn/


166

Third, we need to constantly check the consistency of NTMs from root documents (that

is, laws and ordinances, among others) with those under guiding documents (such as decrees

and circulars) to avoid duplication. In many cases, the NTMs at the decision or circular levels are

only elaborated from the laws, without adding more effect. Looking at the root documents

ensures that the affected products are captured comprehensively, but the period of effects and

exemption of effects may be better presented in the guiding documents.

Finally, given the proliferation of FTAs in Viet Nam (Figure 12.1), one should keep track

of all those FTAs. At this stage, FTAs do not affect NTMs as Viet Nam continues to apply them

equally to all partners. That is, preferential treatment under FTAs is not done significantly by

means of NTMs. Still, the large number of bilateral and plurilateral FTAs now does not exclude

the possibility that some NTMs are effective towards selected countries only. In addition, rules

of origin may have more implications under those FTAs, but are excluded from this analysis.

4. Recommendations

On the basis of the above identification of NTMs and the key lessons that emerged, we

present some recommendations for Viet Nam. First, the country needs to frequently update the

database of the government’s inquiry points (SPS, TBT). The websites are accessible, but

sometimes regulations are already ineffective or have been amended. Also, the documents are

available in only in Vietnamese, so an English translation should be added to ensure it can be

understood by foreign as well as domestic traders.

Second, Viet Nam needs to promptly construct a national trade repository, which would

provide more consistent, transparent, and easily accessible information on NTMs. It may also

help prepare the country for implementing commitments under various international

frameworks (such as the work on the ASEAN Trade Repository under the ASEAN Economic

Community).

Third, the regulations should also clearly identify HS codes for affected products in NTM

regulations. Having worded descriptions of affect products is insufficient, given the inadequate

harmonization of product groups in Viet Nam and in other partners. Listing the HS codes can

help traders in making customs declarations and improves the quality of custom data on trade.

Fourth, trade effects of NTMs should be well documented. This will give more insight

into the types of NTMs that are relevant and/or can be phased out. In addition, given the

complexity of regulations that might have NTM implications, analysing the trade effects can

actually help in avoiding unnecessary burdens on trade activities.

Chapter 12

167

Fifth, Viet Nam should continue to apply NTMs equally to all partners. In other words,

Viet Nam should avoid particular NTMs for imports from certain countries or territories, except

under special circumstances or for a short period. Using NTMs on a discriminatory basis is likely

to divert trade away from the partners concerned and increase administrative costs for

managing NTMs in Viet Nam.

Finally, Viet Nam should aim for better more transparent justified NTMs. This will help

reduce the unnecessary burden of NTMs on traders and businesses. In various cases, ex ante

consultation might help collect relevant insight from traders and businesses, which would

improve the quality of the regulation itself – when the business community is confident NTMs

are legitimate, this will improve their actual effectiveness.

References

Central Institute for Economic Management (2015), Impacts of FTAs and BITs on Viet Nam’s Long-term Development Goals: Case Study of Food Processing and Electronics Sectors. Funded by ActionAID International Viet Nam. In Vietnamese and English.

Truong, D.T., Vo, T.T., Bui, T.G., Phan, V.C., Le, T.D., Nguyen, A.D. and Pham, S.A. (2011), Impacts of Market Access Commitments under WTO and FTAs on Production and Business in Viet Nam. Hanoi: Multilateral Trade Assistance Project. In Vietnamese.

United Nations Conference on Trade and Development (UNCTAD) (2012), NTM Classification. February 2012 Version. Online. Available at: http://unctad.org/en/PublicationsLibrary/ditctab20122_en.pdf (accessed 24 January 2015).

http://unctad.org/en/PublicationsLibrary/ditctab20122_en.pdf

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